UC-NRLF 


HJ 


112 


of  Nebraska 


REPORT 


OF  THE 


SPECIAL  COMMISSION 


ON 


Revenue  and  Taxation 


1914 


STATE    OF    NEBRASKA 


REPORT 

OF  THE 

Special  Commission 

ON 

REVENUE  AND  TAXATION 

1914 


LINCOLN,  NEBRASKA 


1914 
THE  WOODRUFF  PRESS 

LINCOLN,  NEB. 


NATIONAL  TAX  ASSOCIATION, 

OFFICE  OF  TREASURER, 


LETTER  OF  TRANSMITTAL 

LINCOLN,  Nebraska,  October  15,  1914. 

Hon.  John  H.  Morehead,  Governor  of  Nebraska. 

YOUR  EXCELLENCY:  We  have  the  honor  to  submit  herewith 

the  report  of  the  Special  Commission  on  Revenue  and  Taxation, 

appointed  by  you  on  June  16,  1913  pursuant  to  Chapter  188  of 

the  Laws  of  1913. 

Respectfully, 

J.  H.  GROSVENOR,  Aurora 
GEORGE  O.  VIRTUE,- Lincoln 
CHARLES  W.  SEARS,  Omaha 
CHARLES  A.  SCHAPPEL,  Pawnee  City 
EARL  B.  GADDIS,  Lincoln 


315130 


TABLE  OF  CONTENTS 

INTRODUCTION 1—10 

History  of  the  Commission 1 

The  Proposed  Tax  Amendment 7 

Summary  of  the  Report;   Recommendations 8 

CHAPTER  I.     THE  PUBLIC  REVENUE 11—33 

Growth  of  the  Tax  Revenues 14 

Where  the  Increase  has  Occurred 14 

Are  We  Outrunning  Our  Resources 15 

Growth  of  Bonded  Indebtedness 16 

The  State  Appropriations 18 

Growth  of  Local  Expenses 20 

Assessment  of  Property  by  Classes 21 

Causes  of  High  Taxes 23 

Increase  of  Expenditures  and  the  Rise  of  Prices 24 

Need  of  Reform,  Better  Control  of  Appropriations 25 

Recommendations  of  National  Tax  Association  for  Budget  Reform . .  30 
Better  Adjustment  of  the  Tax  Burden 32 

CHAPTER  II.    THE  PRESENT  REVENUE  SYSTEM 34—38 

Requirements  of  a  Good  Revenue  System 34 

System  Prior  to  1903 34 

Act  of  1903 35 

Objections  to  the  Present  Law 38 

CHAPTER  III.  THE  GENERAL  PROPERTY  TAX 39—58 

Its  Theoretical  Unsoundness 40 

Its  Viciousness  in  Practice 41 

Taxation  of  Intangibles 42 

Will  Strong  Administration  Cure  the  Evils 44 

Argument  for  Exemption  of  Intangibles 46 

The  Classified  Property  Tax 48 

The  Registry  Tax , 49 

The  Annual  Flat  Rate  Tax 50 

Experience  of  Minnesota 51 

Experience  of  Other  States 53 

The  Situation  in  Nebraska v 53 

Conditions  Necessary  to  Success 57 

CHAPTER  IV.    THE  REAL  ESTATE  TAX 60—80 

Provisions  of  the  Present  Law 60 

Permanent  Position  Real  Estate  Taxes 61 

The  Taxation  of  Improvements 61 

The  Real  Estate  Assessment 64 

(i) 


Improved  Methods  of  Assessment 66 

True  Consideration  in  Deeds 67 

Classification  of  Real  Estate 69 

Tax  Maps 71 

Aid  of  Experts " 71 

Assessment  of  Buildings 72 

Publicity  for  Assessments 73 

Quadrennial  or  Biennial  Assessments 75 

Forest  Taxation 76 

Increment  Taxation 77 

CHAPTER  V.    THE  MORTGAGE  TAX  LAW 81—90 

Provisions  of  the  Law 81 

Operation  of  the  Law 81 

Effect  of  Mortgage  Exemption  on  the  Interest  Rate 82 

Effect  on  Volume  of  Mortgages  Listed 85 

Deductions  from  Value  of  Capital  Stock 87 

Conclusions  and  Recommendations 88 

CHAPTER  VI.    THE  TAXATION*  OF  CORPORATIONS 91—109 

I.    The  Public  Service  Corporations 

1.  The  Railroads 91—97 

The  Present  Method  of  Taxation 91 

Terminal  Taxation 92 

Yield  of  the  Railroad  Taxes 92 

Are  the  Railroads  Adequately  Taxed 95 

The  Test  of  Profits 96 

2.  Sleeping  Car  Companies 97 — 101 

History  and  Present  Method 97 

Operation  of  the  Law 98 

Criticism  and  Recommendations 99 

The  Gross  Earnings  Tax 100 

Other  Car  Companies . 100 

Summary 101 

3.  The  Express  Companies 101 — 105 

The  Present  Method 101 

Local  Occupation  Taxes 102 

The  Two  Per  Cent  Occupation  Tax  of  1913 102 

Conclusions  and  Recommendations 103 

4.  The  Telegraph  Companies 105 — 108 

The  Present  Method 105 

Methods  Employed  in  Other  States 106 

Recommendations 108 

5.  The  Telephone  Companies 108 — 109 

II.    The  Banks 110—111 

III.    The  Insurance  Companies Ill — 122 

The  Present  Method  in  Nebraska 112 

Foreign  Life  Companies 112 

Foreign  Accident  and  Surety  Companies 113 

Foreign  Fire  Companies 114 

(ii) 


Domestic  Fire  Companies 115 

Domestic  Life  Companies 116 

Accident  and  Surety  Companies 117 

Central  Administration  Recommended 117 

Insurance  Companies  and  the  Property  Tax 118 

Conclusions  and  Recommendations 120 

Summary .122 

IV.     Mercantile  and  Manufacturing  Corporations 122 — 132 

The  Law  as  to  Taxing  Property,  Franchise,  Shares 123 

The  State  Occupation  Fee 124 

Problem  of  Franchise  Taxation,  Its  Nature  and  Difficulties. ...  125 

Taxing  the  "Corporate  Excess" 126 

Why  Intangible  Values  Should  Be  Assessed .128 

Question  of  Discrimination  Against  Corporations 129 

Administrative  Requirements 131 

Is  the  State  Occupation  Tax  a  Bar 131 

Conclusions  and  Recommendations 132 

CHAPTER  VII.    SEPARATION  OF  SOURCES  OF  REVENUE  133— 156 

The  Movement  for  Segregation 133 

The  Argument  Based  on  Functions  of  State  and  Local  Governments .  133 

Separation  to  Avoid  Undervaluation 135 

Separation  as  a  Step  Toward  Local  Option 138 

Evil  of  Piling  up  the  Levies  on  the  Valuation  Base 141 

Effect  of  Separation  on  Economy 142 

Partial  Separation  Desirable 142 

Separation  on  Administrative  Grounds 143 

Problem  of  Highly  Localized  Values 143 

How  Distribute  the  Railroad  Taxes 144 

Tables  Showing  the  Effect  of 

1.  Using  the  Railroad  Taxes  for  State  Purposes 147 

2.  Apportioning   the   Railroad   Taxes   According   to   School 
Population 151 

3.  Charging  State  Taxes  on  the  Basis  of  Local  Expenditures..  151 

Explanation  of  Tables 153 

A  Feasible  Plan  of  Separation 156 

CHAPTER  VIII.    PROBLEMS  OF  ADMINISTRATION 157—170 

Conditions  Prior  to  1903 157 

Reforms  of  1903,  The  County  Assessor  System 158 

The  State  Board's  Powers  Enlarged 158 

Effect  of  the  Act  of  1903 160 

Devitalization  of  the  Law 

Elective  Precinct  Assessor  Restored 160 

Office  of  County  Assessor  Optional 161 

Recommendations 162 

Central  Control  of  Assessments  in  Other  States 163 

Need  of  a  Permanent  Tax  Commission 164 

Recommendations  as  to  Form 168 

Probable  Expense 170 

(iii) 


CHAPTER  IX.     INCOME  TAXATION 171—177 

Growing  Interest  in  the  Income  Tax 171 

Why  Desirable 171 

The  Wisconsin  Law 172 

Exemptions  and  Deductions 172 

Rates,  Administration 173 

Personal  Property  Practical  Exempt 173 

Operation  of  the  Law 174 

Distribution  of  the  Tax 175 

Is  the  Tax  Inquisitorial 175 

The  Federal  Law  and  a  State  Tax  on  Incomes 176 

Conclusions  and  Recommendations 177 

CHAPTER  X.     THE  INHERITANCE  TAX  LAW 178—187 

History  of  the  Statute 187 

Recommendations  as  to 

Exemptions 180 

Rates 181 

Administration 181 

The  Use  of  the  Tax 182 

Financial  Results  of  the  Law 183 

Synopsis  of  Legislation  in  other  States 186 

CHAPTER  XL    OCCUPATION  TAX  ON  MANUFACTURERS  AND 

DEALERS  IN  LIQUORS  AND  TOBACCOS 188—190 

Reasons  for  Such  Tax 188 

Recommendations 189* 

CHAPTER  XII.    THE  TAXATION  OF  GRAIN  DEALERS...  .191— 195 

History  and  Present  Method 191 

Methods  in  Other  States 194 

Recommendations 195 

APPENDIX 197—240 

A.  Summary  of  State  Laws  for  Taxing  Public  Service  Corpora- 

tions   .197 

B.  Statistics  of  Interest  Rates  on  Mortgages 227 

C.  Statistics  Relating  to  County  and  Local  Levies 240 


(iv) 


INTRODUCTION 
HISTORY  OF  THE  COMMISSION 

The  State  Revenue  and  Tax  Commission  was  appointed  by 
Governor  Morehead  on  June  16, 1913,  under  authority  of  Chapter 
188  of  the  Laws  of  1913,  which  provides  as  follows: 

SECTION  1.  (Taxation,  revenue,  commission.)  Within 
thirty  days  from  the  adjournment  of  the  Legislature,  the  Governor 
shall  appoint  a  commission  of  five  persons,  residents  of  Nebraska, 
specially  qualified  by  experience  and  study  to  deal  with  the  prob- 
lems of  taxation  in  Nebraska,  and  to  compare  conditions  here 
with  conditions  and  experience  elsewhere,  and  not  more  than 
three  of  whom  shall  be  of  the  same  political  party.  Any  vacancy 
which  may  occur  in  such  commission  by  reason  of  death,  resigna- 
tion or  otherwise,  shall  be  filled  by  appointment  by  the  Governor. 

SEC.  2.  (Study:  report.)  Said  commission  shall  make  a 
careful  study  of  the  subject  of  revenue  and  taxation  with  special 
reference  to  the  problems  presented  in  Nebraska  and  shall  in- 
vestigate and  study  the  systems  of  raising  revenue  and  admin- 
istering the  same  in  other  states  and  countries.  It  shall  prepare 
by  July  1,  1914,  a  concise  report  in  popular  language,  presenting 
to  the  public  the  principal  defects  of  the  revenue  system  of  Ne- 
braska and  the  principal  improvements  suggested  by  experience 
elsewhere.  There  shall  be  prefixed  to  such  report  a  brief  abstract 
thereof  containing  in  condensed  form  the  substance  of  the  com- 
plete report.  Ten  thousand  copies  of  such  report  and  abstract 
shall  be  printed  for  general  distribution  in  the  state.  In  case  the 
constitutional  amendment  submitted  under  House  Roll  92, 
legislative  session  1913,  shall  be  approved  at  the  polls  in  No- 
vember, 1914,  said  commission  shall  prepare  a  bill  presenting  a 
comprehensive  revenue  law  for  the  State  of  Nebraska  which  it 
shall  recommend  for  adoption  to  the  legislature.  Said  bill  shall 
be  prepared  and  submitted  to  the  Governor  on  or  before  January 
15,  1915. 

SEC.  3.  (Access  to  records:  legislative  bureau:  assistants.) 
The  commission  herein  provided  shall  have  free  access  to  all 
books  and  records  in  the  several  departments  of  the  state  govern- 
ment and  in  the  counties,  cities  and  villages  in  this  state.  It 
shall  office  and  work  in  co-operation  with  the  Legislative  Refer- 
ence Bureau,  making  use,  so  far  as  practicable,  of  the  facilities 
afforded  by  that  bureau,  and  it  may  employ  a  stenographer  and 
other  necessary  help,  in  the  preparation  of  its  report. 

SEC.  4.  (Compensation:  expenses.)  The  members  of  said 
commission  shall  be  paid  at  the  rate  of  $10.00  per  day  each  for 


6  Report  of  Nebraska^Tax  Commission 

the  time  actually  employed  in  preparing  said  report  and  bill, 
not  to  exceed  sixty  days  for  each  member  thereof.  The  members 
of  the  commission  shall  be  allowed  necessary  expenses  incurred 
in  the  prosecution  of  their  work,  which  shall  be  paid  upon  pre- 
sentation of  vouchers  signed  by  the  Governor  to  the  Auditor  of 
Public  Accounts. 

Approved,  April  21,  1913. 

The  membership  of  the  commission  as  chosen  by  the  Gover- 
nor was  as  follows:  J.  H.  Grosvenor,  an  attorney  of  Aurora, 
Charles  A.  Schappel,  county  treasurer  of  Pawnee  county;  George 
O.  Virtue  of  the  Economics  department  of  the  University  of 
Nebraska;  Charles  W.  Sears,  an  attorney  of  Omaha;  and  Earl  B. 
Gaddis,  a  newspaper  man  of  Lincoln. 

The  Commission  began  its  labors  by  getting  in  touch  with  tax 
administrative  officers  of  the  state  and  members  of  the  legisla- 
ture who  were  familiar  with  the  operation  of  the  present  law  and 
who  had  suggestions  for  remedying  its  defects.  It  also  began  an 
independent  study  of  the  laws  of  other  states,  and  the  reports 
prepared  by  special  and  permanent  commissions  of  other  states. 
Later  in  the  year  1913  it  also  began  a  series  of  public  hearings 
which  representatives  of  all  interests  in  the  state  were  asked  to 
attend.  These  hearings  were  continued  for  several  months,  some 
one  hundred  and  fifty  men  appearing  before  the  commission 
during  that  time.  These  men  represented  the  farming  interests, 
railroads,  insurance  companies,  county  officials,  merchants,  stock- 
raisers,  telephone  companies,  and  various  other  activities. 

The  commission  also  made  a  trip  to  Kansas  to  study  the 
operation  of  the  tax  laws  there  and  for  the  purpose  of  getting  first 
hand  knowledge  of  the  administration  of  a  permanent  tax  com- 
mission. This  trip  was  of  signal  benefit  to  the  commission. 
Various  other  commissions  throughout  the  country  have  given 
material  help  through  correspondence. 

Several  members  of  the  commission  joined  with  the  National 
Tax  association  and  have  kept  in  touch  with  the  proceedings  of 
that  body.  It  was  represented  by  Mr.  Charles  A.  Schappel  at 
the  Buffalo,  N.  Y.  meeting  of  that  association  in  October  1913 
and  at  the  Denver,  Colorado  meeting  held  in  September  1914, 
by  Mr.  George  0.  Virtue. 

For  assistance  rendered  generously  and  gratuitously  in  carry- 
ing on  its  work  of  research  and  the  preparation  of  its  report,  the 


Tax  Amendment  7 

Commission  wishes  to  thank  the  secretary  of  the  state  board  of 
equalization  and  assessment,  the  director  of  the  legislative  refer- 
ence bureau  and  his  assistants,  and  all  other  state,  county  and 
local  officials  who  have  shown  an  interest  in  the  investigation. 

THE  PROPOSED  TAX  AMENDMENT 

The  authority  of  the  legislature  over  taxation  and  exemption 
from  taxation  is  found  in  Sections  1  and  2  of  Article  9  of  the 
Constitution  of  1875.  The  sections  provide  as  follows: 

"SECTION  1.  The  legislature  shall  provide  such  revenue  as 
may  be  needful,  by  levying  a  tax  by  valuation,  so  that  every 
person  and  corporation  shall  pay  a  tax  in  proportion  to  the  value 
of  his,  her  or  its  property  and  franchises  the  value  to  be  ascer- 
tained in  such  manner  as  the  legislature  shall  direct,  and  it  shall 
have  power  to  tax  peddlers,  auctioneers,  brokers,  hawkers,  com- 
mission merchants,  showmen,  jugglers,  inn-keepers,  liquor 
dealers,  toll  bridges,  ferries,  insurance,  telegraph  and  express 
interests  or  business,  venders  of  patents,  in  such  manner  as  it 
shall  direct  by  general  law,  uniform  as  to  the  class  upon  which  it 
operates. 

SEC.  2.  The  property  of  the  state,  counties  and  municipal 
corporations,  both  real  and  personal  shall  be  exempt  from  taxa- 
tion, and  -such  other  property  as  may  be  used  exclusively  for 
agricultural  and  horticultural  societies,  for  school,  religious, 
cemetery,  and  charitable  purposes,  may  be  exempted  from  taxa- 
tion, but  such  exemption  shall  be  only  by  general  law.  In  the 
assessment  of  real  estate  incumbered  by  public  easement,  any 
depreciation  occasioned  by  such  easement,  may  be  deducted  in 
the  valuation  of  such  property.  The  legislature  may  provide 
that  the  increased  value  of  lands,  by  reason  of  live  fences,  fruit 
and  forest  trees  grown  and  cultivated  thereon,  shall  not  be  taken 
into  account  in  the  assessment  thereof." 

The  legislature  of  1913  submitted  to  the  electors  an  amend- 
ment to  be  voted  upon  at  the  general  election  of  1914,  which  if 
adopted  will  greatly  enlarge  the  authority  of  the  legislature  over 
taxation.  If  it  becomes  a  part  of  the  Constitution  the  legislature 
will  have  power  to  exempt  other  classes  of  property  than  those 
now  exempted,  to  classify  property  for  purposes  of  taxation,  to 
adopt  some  other  basis  for  taxation  than  the  value  of  property, 
such  as  gross  earnings,  and  to*  impose  income  taxes.  The  pro- 
posed amendment  is  as  follows: 


8  Report  of  Nebraska  Tax  Commission 

"SECTION  1.  That  Section  1  of  Article  9  of  the  Constitu- 
tion of  the  State  of  Nebraska  be  amended  to  read  as  follows: 

SEC.  1.  (Revenue.)  The  rules  of  taxation  shall  be  uniform 
as  to  any  given  class  and  taxes  shall  be  levied  upon  such,  property 
as  the  legislature  shall  prescribe.  Taxes  may  also  be  imposed 
on  incomes,  privileges  and  occupations,  which  taxes  may  be 
graduated  and  progressive,  and  reasonable  exemptions  may  be 
provided,  in  addition  to  those  hereinafter  specifically  mentioned 
in  section  2  of  this  article. 

SEC.  2.  (Submission.)  That  at  the  general  election  in 
November,  1914,  there  shall  be  submitted  to  the  electors  of  the 
state  for  their  approval  or  rejection  the  foregoing  proposed- 
amendment  to  the  Constitution  in  the  following  form:  'For 
amendment  to  the  Constitution  providing  for  uniform  and  pro- 
gressive taxation/  and  'against  said  proposed  amendment  to 
the  Constitution  providing  for  uniform  and  progressive  taxa- 
tion/ ' 

SUMMARY  OF  THE  REPORT 

Defects  of  the  Tax  Law. — The  chief  defects  of  the  present 
law  grow  out  of  the  attempt  to  raise  nearly  all  the  public  revenues 
from  a  tax  on  all  property  according  to  its  value.  The  law  dis- 
regards all  differences  in  the  economic  character  of  property,  by 
treating  all  the  citizen's  possessions  as  equally  indicative  of  his 
ability  to  support  the  government. 

The  law  fails  to  recognize  the  fact  that  many  professions 
and  businesses  which  yield  a  large  income  require  little  or  no 
property,  thus  permitting  many  to  escape  their  fair  share  of  the 
tax  burden. 

It  fails  to  take  account  of  the  great  growth  of  corporate 
wealth  by  providing  the  means  of  reaching  such  wealth  adequately 
once,  and  but  once. 

Other  defects  are  due  to  inadequate  administrative  provis- 
ions. While  the  law  has  the  appearance  of  providing  a  central- 
ized control  over  assessments,  this  control  is  only  nominal.  The 
precinct  assessorship,  filled  by  election,  and  the  absence  of 
effective  state  control  make  the  system  a  highly  decentralized  one. 

The  present  law  fails  because  it  commands  the  local  assessor 
to  do  some  things  no  assessor  can  succeed  in  doing,  and  asks 
them  to  preform  other  duties  which  can  be  properly  preformed 
only  by  a  well  equipped  state  board  of  assessors. 

Recommendations  for  Reform. — In  view  of  the  fact 
that  an  amendment  to  the  Constitution  is  pending  which  if 


//  Amendment  Fails  9 

adopted  will  give  to  the  legislature  larger  power  over  taxation. 
The  Commission  has  had  constantly  to  keep  in  mind  what  can 
be  done  under  the  present  constitution  and  what  may  be  done  in 
case  the  tax  amendment  is  adopted.  Our  recommendations, 
therefore,  fall  under  two  classes,  those  which  may  be  followed  in 
case  the  amendmsnt  fails,  and  those  which  may  be  followed  in 
case  the  amendment  is  adopted  at  the  November  election. 

(1)  In  Case  the  Amendment  Fails.— The  recommend- 
ations of  the  Commission  for  changes  under  the  present  consti- 
tutional restrictions  may  be  summarized  briefly  as  follows: 

The  creation  of  a  permanent  state  tax  commission  with 
power:  To  supervise  the  local  assessments;  to  assess  all  public 
service  corporations,  and  in  time  all  corporations  doing  business 
in  the  state;  to  study  the  operation  of  the  revenue  law;  to  collect 
and  publish  information  relating  to  the  revenues  and  expenditures; 
and  to  recommend  to  the  legislature  needed  changes  in  the  law. 

That  the  office  of  precinct  assessor  be  abolished,  that  the 
county  assessor  be  made  in  fact  as  well  as  in  name  the  assessor  of 
all  property  that  is  to  te  locally  assessed  aided  by  as  many  deputies 
as  may  be  required. 

That  the  fractional  assessment  (one-fifth  of  the  actual  value) 
be  abandoned  and  that  all  taxable  property  unless  otherwise 
specifically  provided  for  shall  be  assessed  at  its  true  value. 

That  an  effective  method  of  assessing  corporations  be  adopted 
especially  for  reaching  the  "intangible"  or  "franchise"  value 
connected  with  their  operations. 

That  the  method  of  taxing  express  companies  be  changed  by 
abolishing  all  local  occupation  taxes  and  imposing  upon  them,  a 
gross  earnings  tax  to  be  paid  into  the  state  treasury. 

That  similar  changes  be  made  in  the  method  of  taxing 
telegraph  companies. 

That  the  method  of  taxing  sleeping  car  companies  be  changed 
so  as  to  reach  the  "franchise"  value,  and  not  merely  the  value 
of  the  cars  used  in  the  state;  that  local  occupation  taxes  on  theze 
companies  be  abolished ;  and  that  all  taxes  be  paid  into  the  state 
treasury. 

That  the  method  of  taxing  domestic  insurance  companies  be 
changed  so  as  to  place  them  on  a  footing  of  equality  with  foreign 
companies  of  the  same  class  and  that  the  proceeds  of  such  taxes 
be  paid  into  the  state 'treasury. 


10  Report  of  Nebraska  Tax  Commission 

That  greater  publicity  be  given  to  all  questions  relating  to 
revenue  and  expenditure,  assessments  and  exemptions. 

That  the  inheritance  tax  law  be  amended  by  reducing  the 
exemptions  allowed,  by  increasing  the  rates  in  the  second  and 
third  classes  of  beneficiaries,  by  improving  the  administration  in 
the  matter  of  appraisals,  etc.,  and  by  turning  the  proceeds  of 
the  tax  into  the  state  treasury. 

(2)  In  Case  the  Amendment  is  Adopted.^In  case  the 
constitution  is  amended  so  as  to  give  the  legislature  authority 
to  act  the  Commission  recommends: 

That  all  the  changes  recommended  above  be  enacted  into 
law. 

That  the  sleeping  car  companies  and  other  private  car  com- 
panies be  taxed  on  the  basis  of  their  gross  earnings  from  intra- 
state  business  and  the  state's  share  of  interstate  business. 

That  the  principles  of  the  "classified  property  tax"  be 
recognized  by  placing  intangible  property  in  a  class  by  itself  and 
subjecting  it  to  a  low  rate  of  3  or  4  mills,  uniform  throughout  the 
state,  without  the  privilege  of  deducting  debts  from  credits 
now  allowed  under  the  decisions  of  the  court. 

That  the  distinction  between  land  and  the  improvements 
thereon  be  recognized  by  making  the  latter  assessable  at  a  lower 
percentage  of  their  value  than  the  land. 

That  provision  be  made  for  exempting  from  taxation  house- 
hold goods  to  the  value  of  $200  for  each  head  of  a  family. 

That  a  suitable  tax  be  imposed  upon  the  manufacture  and 
sale  of  malt  and  spirituous  liquors  and  tobaccos,  the  proceeds  to 
be  paid  into  the  state  treasury. 

And  finally  the  Commission  recommends  for  future  action, 
but  not  by  the  next  legislature,  that  provision  be  made  for  an 
income  tax  law.  In  the  opinion  of  the  Commision  the  attempt 
to  enforce  such  a  law  in  any  other  way  than  through  an  efficient 
state  board  would  prove  futile.  The  first  step  toward  effective 
administration  of  an  income  tax  law  lies  in  establishing  such  a 
board. 


CHAPTER  I 

THE  PUBLIC  REVENUES 

It  is  proposed  to  set  forth  in  this  chapter  the  more  significant 
facts  with  respect  to  the  revenues  of  the  state  and  the  local 
governments.  It  may  be  said  at  the  outset  that  one  of  the 
greatest  difficulties  with  which  the  Commission  has  had  to  con- 
tend is  the  dearth  of  information  about  the  operation  of  the 
revenue  laws.  No  one  has  been  charged  with  the  duty  of  collect- 
ing statistics  of  the  public  income  and  expenditure  as  a  whole  and 
of  classifying  them  in  such  a  way  that  they  will  tell  what  the  in- 
terested taxpayer  wants  to  know.  We  have  attempted  to  collect 
and  classify  some  such  information  from  county  and  city  officials 
but  while  some  officers  have  given  generously  of  their  time,  pur 
appeals  for  information  have  met  with  but  partial  success.  We 
have  thus  had  to  fall  back  upon  census  figures  in  many  cases  for 
the  statistical  data  here  presented. 

The  Public  Revenues. — We  have  no  means  of  tracing  the 
growth  of  the  public  revenues  as  a  whole  for  the  state  and  local 
governments.  The  table  which  follows,  compiled  from  the  census 
reports,  gives  a  general  view  of  the  sources  of  revenue  for  the  state 
and  the  local  governments  and  their  relative  importance  as  they 
were  twelve  years  ago.  There  has  been  no  material  change  in 
the  revenue  system  since  that  time.  While  the  public  revenues 
have  increased  since  1902  they  are  now  derived  from  about  the 
same  sources  in  approximately  the  same  proportion  as  shown  in 
the  table: 


12 


Report  of  Nebraska  Tax  Commission 


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14 


Report  of  Nebraska  Tax  Commission 


Growth  of  the  Tax  Revenues. — By  far  the  most 
important  source  of  revenue  for  all  grades  of  government  is  the 
general  property  tax.  This  is  an  ad  valorem  tax,  that  is;  a 
tax  laid  according  to  the  value  of  property.  In  1902  out  of 
the  total  revenue  receipts  of  $11,665,181,  almost  $8,000,000 
came  from  this  source.  By  aid  of  the  census  figures  given  below 
we  can  trace  the  growth  of  the  taxes  levied  for  state  and  local 
purposes : 

1860 $91,863 

1870 821,862 

1880 2,792,480 

1890 8,325,566 

1902 9,499,415 

1913 22,487,791 

Combining  these  figures  with  the  assessed  valuation  of 
property  in  the  state,  for  purposes  of  comparison,  we  have  the 
following: 

TABLE  III 

Table  Showing  the  Assessed  Valuation  and  Total  Levies  of 

Ad  Valorem  Taxes  for  State  and  Local  Purposes, 

1860-1913 


Year 

ASSESSED  VALUATION 

TOTAL  LEVIES  AD  VALOREM  TAXES 

Amount 

Per 
Capita 

Amount 

Rate  per  $100 
of  Assessed 
Valuation 

Per 

Capita 

1860 

$7,926,949 
143,667,693 
90,585,782 
184,770,305 
180,091,492 
470,690,414 

$257 
'355 
200 
174 
168 
392 

$91,863 
'821,862 
2,792,480 
8,325,566 
9,499,415 
22,487,791 

$1.24 
1.88 
3.08 
4.51 
5.27 
24.77 

$3.19 
8.35 
6.17 

7.86 
8.89 
18.28 

1870  

1880 

1890         

1902          

1913  

basis. 

2Based  on  the  general  assessments.  The  state  boards'  estimate  of  47.25 
mills  as  the  average  levy  for  the  state  in  1913  takes  into  account  the  terminal 
valuations  of  the  railroads  for  municipal  purposes. 

Where  the  Increase  has  Occurred. — We  had  hoped  to 
show  for  the  whole  state  the  amount  of  taxes  levied  during  the 
last  twenty  years  for  the  use  of  the  various  governmental  divi- 
sions. We  have  been  able  to  secure  this  information,  however, 
from_only^twelve  counties.  The  results  are  given  in  Table  IV. 


Distribution  of  Taxes 


15 


TABLE  IV 

Showing  the  Taxes  Charged  in  Twelve   Counties  for  the  Use  of 
the  State,  County,  City  and  other  Divisions  of  Government 
for  the  Years  1894  to  1913  Inclusive  and  the  Per- 
centage of  the  Total  Charged  for  Each 
Class  of  Government 


Perc't 

Perc't 

Perc't 

Perc't 

Perc't 

Year 

State 

of 

County1 

of 

Cityz 

of 

Township 

of 

Precinct 

of 

Total  1 

Total 

Total 

Total 

Total 

1894. 

$168,627.06 

15.34 

$373,412.72   33.98 

$66,284.34 

6.03 

$41,942.32 

3.82 

$9,666.51 

.88 

1895.. 

155,258.95 

15.72 

343,652.46!  34.79 

60,485.07 

6.12 

30,025.84 

3.04 

8,894.61 

.90 

1896.. 

156,645.78 

16.55 

296,876.921  31.37 

55,575.35 

5.87 

28,159.89 

2.98 

10,473.09 

1.11 

1897. 

156,474.51 

16.56 

306,432.01 

32.44 

59,964.58 

6.35 

27,639.69 

2.93 

7,156.71 

.76 

1898.. 

156,403.54 

15.47 

334,150.29 

33.06 

65,661.44 

6.50 

35,981.80 

3.56 

5,396.09 

.53 

1899.. 

190,111.25 

16.92 

345,745.75 

30.77 

68,928.29 

6.14 

50,486.57 

4.49 

3,367.12 

.30 

1900. 

176,218.07 

15.55  1       342,961.75 

30.27 

67,181.00 

5.93 

54,473.90 

4.81 

3,413.82 

.30 

1901.. 

186,853.55 

15.38 

374,574.84 

30.83 

75,872.65 

6.24 

54,292.19 

4.47 

8,398.03 

.69 

1902  .  . 

185,045.81 

14.40 

393,465.97 

30.63 

113,840.72 

8.86 

55,962.55 

4.36 

8,880.81 

.69 

1903  .  . 

241,967.88 

17.02 

421,605.50 

29.65 

120,770.78 

8.49 

68,613.62 

4.83 

10,233.38 

.72 

1904  .  . 

300,976.96 

17.05 

495,595.04 

28.0*7 

149,458.89 

8.47 

91,159.50 

5.16 

10,482.71 

.59 

1905.. 

376,701.09 

20.44 

487,887.03 

26.47 

165,007.44 

8.95 

70,808.22 

3.84 

10,927.41 

.59 

1906.. 

385,254.52 

20.46 

513,194.11 

27.26 

174,656.53 

9.28 

69,575.91 

3.70 

8,513.72 

.45 

1907  .  . 

409,849.01 

20.45 

541,846.50 

27.04 

202,492.56 

10.10 

82,618.74 

4.12 

8,670.68 

.43 

1908.. 

430,933.88 

18.84 

583,357.72 

25.51 

247,768.27 

10.83 

94,772.09 

4.14 

11,036.41 

.48 

1909.. 

383,835.11 

16.55 

593,087.95 

25.57 

292,135.14 

12.60 

96,647.17 

4.17 

11,931.41 

.51 

1910.. 

357,514.49 

14.26 

677,824.28 

27.02 

331,968.86 

13.24 

106,311.87 

4.24 

11,634.22 

.46 

1911.. 

440,695.27 

16.61 

673,635.85 

25.39 

325,464.93 

12.26 

121,490.01 

4.58 

6,599.59 

.25 

1912.. 

409,600.58 

14.31 

781,233.73 

27.29 

353,460.37 

12.35 

144,737.88 

5.05 

7,462.56 

.26 

1913.. 

614,481.11 

18.64 

836,344.93 

25.37 

392,841.28 

11.91 

148,283.78 

4.50 

7,458.25 

.23 

Totals 

$5,883,448.42               |  $9,716,885.35 

$3,389,818.49 

$1,473,983.54 

$170,597.13 

Av'ge.j 

17.01 

28.09 

9.80 

4.26 

.49 

Perc't 

Perc't 

Perc't 

Perc't 

Year 

Road* 

of 

Railway 

of 

School  and 

of 

Poll 

of 

Total  Taxes 

Total 

Bond 

Total 

School  Bond4 

Total 

Total 

Charged* 

1894  .  . 

$10,671.00 

.97 

$30,735.96 

2.80 

$338,406.79 

30.80 

$59,135.00 

5.38 

$1,098,881.70 

1895  .  .  . 

8,868.17 

.90 

33,277.14 

3.37 

297,875.44 

30.15 

49,449.00 

5.01 

987,786.68 

1896  .  .  . 

12,554.131    1.33 

32,369.22 

3.42 

304,635.02 

32.20 

48,924.00 

5.17 

946,213.40 

1897  .  .  . 

9,044.421      .96 

31,302.66 

3.31 

296,007.73 

31.34 

50,539.00 

5.35 

944,561.31 

1898.  . 

14,099.55 

1.39 

33,464.15 

3.31 

304,937.82 

30.18 

60,589.00 

6.00 

1,010,683.68 

1899  .  .  . 

17,750.31 

1.58 

36,929.10 

3.29 

344,906.20 

30.70 

65,238.00 

5.81 

1,123,462.59 

1900.  .  . 

19,041.58 

1.68 

38,209.97 

3.37 

366,145.93 

32.31 

65,490.00 

5.78 

1,133,136.02 

1901.  . 

9,646.33 

.79 

47,183.50 

3.88 

392,418.26 

32.30 

65,828.00 

5.42 

1,215,067.35 

1902.  .  . 

5,626.24 

.44 

44,751.49 

3.48 

410,946.93 

31.99 

66,222.00 

5.15 

1,284,742.52 

1903  .  .  . 

15,146.77 

1.07 

39,442.94 

2.77 

438,140.58 

30.81 

65,905.00 

4.64 

1,421,826.45 

1904  .  . 

28,793.46,    1.63 

32,465.10 

1.84 

582,091.13 

32.97 

74,571.00 

4.22 

1,765,593.79 

1905.     . 

26,360.06  1    1.43 

26,079.15 

1.42 

602,227.21 

32.68 

77,121.00 

4.18 

1,843,118.61 

1906  .     . 

22,378.26'    1.19 

22,602.47 

1.20 

609,892.97 

32.40 

76,373.00 

4.06 

1,882,441.49 

1907  .     . 

28,647.84     1.43 

21,969.56 

1.10 

645,220.67 

32.20 

62,681.50 

3.13 

2,003,997.06 

1908. 

54,188.32i    2.37 

24,454.84 

1.07 

776,501.32 

33.95 

64,237.50 

2.81 

2,287,250.35 

1909.     . 

56,717.73!    2.45 

8,946.88 

.39 

812,493.35 

35.03 

63,438.25 

2.73 

2,319,232.99 

1910.     . 

54,740.49     2.18 

5,174.86 

.21 

898,652.06 

35.83 

64,252.50 

2.56 

2,508,073.63 

1911.  . 

55,100.84 

2.08 

4,525.62 

.17 

961,197.06 

36.22 

64,719.50 

2.44 

2,653,428.67 

1912.  .  . 

83,192.17 

2.91 

1,015,974.74 

35  48 

67,338.00 

2.35 

2  863  000  03 

1913.  .  . 

93,497.34 

2.84 

1,139,101.12 

34.54 

64,889.00 

1.97 

3,296,896.81 

Totals.. 

$626,065.01 

$513,884.61 

$11,537,772.34 

$1,276,941.25 

$34,589,395.13 

Av'ge.  .  . 

1.81 

1.49 

33.36 

3.69 

deluding  county,  court  house  building  fund,  county  special,  and  ditch  taxes. 

including  city  and  village,  city  special,  and  district  sewer  taxes. 

'Including  road,  special  road,  and  bridge  bond  taxes. 

*" School"  column  contains  school,  free  high  school,  and  school  bond  taxes. 

K)f  the  twelve  counties  contributing  data  for  this  table  ten  began  with  1894  and  ended  with  1913; 
one  began  with  the  year  1899  and  ended  1913;  the  other  with  the  year  1904-1913.  The  twelve  counties 
reporting  are  as  follows:  Clay,  Cuming,  Dawson,  Dundy,  Furnas,  Hamilton,  Madison,  Merrick,  Nuckolta, 
Otoe,  Platte,  and  Richardson. 


16  Report  of  Nebraska  Tax  Commission 

This  table  shows  the  relative  tax  charge  for  the  support  of 
the  various  divisions  of  government  and  gives  a  rough  indication 
of  the  cost  of  maintaining  the  different  governments.  It  does 
not  take  into  account,  however,  the  revenues  derived  from  licenses, 
fees,  fines,  investments,  and  special  taxes.  While  incomplete,  the 
table  indicates  fairly  the  relative  importance  of  the  taxes  raised 
for  the  various  divisions  of  government  throughout  the  state. 

The  table  is  instructive  as  showing  in  what  political  divisions 
the  increase  has  taken  place.  In  the  first  ten  years  of  the  period 
the  total  taxes  charged  increased  29.39  per  cent;  during  the  last 
ten  years  132  per  cent.  But  the  increase  has  been  unevenly  dis- 
tributed. This  is  brought  out  in  the  table  which  follows: 

Per    Cent    of    Increase    of   Taxes   Charged 

1894-1903  1903-1913 

State 43.50  154.00 

County 12.91  98.36 

City 82.20  225.00 

Township 63.60  116.00 

Road 41.95  517.00 

School ...29.47  160.00 

Growth  of  Bonded  Indebtedness. — While  the  levies  have 
thus  been  increasing,  they  have  not  kept  pace  with  the  demand 
for  public  funds.  This  is  brought  out  by  the  table  below  showing 
the  bonded  indebtedness  of  the  state  and  local  governments  less 
sinking  fund  assets  for  the  census  years  1880  and  1890,  and  for 
1902. 

TABLE  V 

Total  Indebtedness  Per 

Year  Less  Sinking  Fund  Assets  Capita 

1880 $7,439,974  $16.56 

1890 15,536,772  14.67 

1902 22,415,041  21.01 

Since  1902  the  bonded  indebtedness  has  grown  rapidly. 
As  shown  by  the  State  Auditor's  Report  there  were  outstanding 
public  bonds  of  all  grades  of  government  on  October  1,  1912, 
amounting  to  $16,234,330,  exclusive  of  the  debts  of  Omaha, 
South  Omaha  and  Lincoln.  The  debts  of  these  cities  for  that 


Taxable  Property  Value 


17 


date  are  not  available,  but  their  combined  debts  taken  at  varying 
times  in  1913  and  1914  amount  to  about  $17,700,000,  making  a 
total  bonded  indebtedness  of  about  $34,000,000.  This  does  not 
include  the  constantly  fluctuating  amount  of  registered  state 
warrants  outstanding.  On  October  1,  1913,  this  item  amounted 
to  $331,908;  on  June  1,  1914,  it  had  risen  to  $928,553. 

The  distribution  of  the  bonded  indebtedness  among  the 
several  governments  exclusive  of  irrigation  district  bonds  was 
as  follows  in  1902  and  1912: 

1902  1912 

State $2,005,001  

Counties 4,781,958 

Cities  and  Villages 12,212,073 

Townships  and  Precincts 1,184,227 

School  Districts .  . 2,231,782 

Other.. 


$3,601,500 

1 23,716,562 

237,500 

6,010,653 

382,964 


Total $22,415,041  $33,949,179 

1  As  explained  above  the  debts  of  Omaha,  South  Omaha  and  Lincoln  here 
included  are  of  later  dates  in  1913  and  1914. 

Are  we  Outrunning  our  Resources? — The  table  given  be- 
low is  designed  to  give  a  comparative  view  of  the  growth  of 
wealth  and  the  levies  of  ad  valorem  taxes. 


TABLE  VI 

Estimated  True  Value  of  Taxable  Property  in  Nebraska  and 
Levies  of  Ad  Valorem  Taxes,  1880-1913 


Year 

ESTIMATED  TRUE  VALUE  OF 
TAXABLE  PROPERTY 

LEVIES  OF  AD  VALOREM 
TAXES 

Amount 

Per 
Capita 

Per 
Capita 

Per  $100 
of  True  Value 

1880.. 

$385,000,000 
1,230,799,466 
1,565,111,824 
1,817,883,418 
3,400,000,000 

$851 
1,162 
1,468 
1,685 
2,768 

$3.08 
4.51 

'  '5.27 
18.28 

$0.73 
.65 

'  '.62 

.74 

1890  

1900  

1902 

1913  

While  absolute  accuracy  cannot  be  claimed  for  the  estimates 
of  the  aggregate  wealth  of  a  community,  they  come  more  nearly 


18  Report  of  Nebraska  Tax  Commission 

indicating  the  taxable  resources  of  the  state  than  the  assessed 
valuation  given  above.  There  is  available  no  census  estimate  of 
wealth  for  1913.  The  estimate  here  made  for  that  year  is  based 
in  part  on  the  census  estimates  for  certain  classes  of  property, 
and  in  part  on  the  assessors'  valuations.  The  estimate  is  probably 
below  the  true  value.  The  tables  show  that  since  1902  the  tax- 
able wealth  has  increased  84  per  cent,  while  the  levies  have  in- 
creased 136  per  cent.  As  remarked  above,  the  value  of  taxable 
property  is  probably  greater  than  $3,400,000,000;  but  it  seems 
clear  that  taxes  have  grown  more  rapidly  than  the  value  of  taxable 
property. 

Increasing  Expense  of  Government. — In  the  absence  of 
any  central  bureau  authorized  to  collect  information  concerning 
public  expenditures  the  means  of  making  a  comparative  study 
for  a  series  of  years  are  wanting.  The  statistics  of  tax  levies 
given  above  indicate  an  increasing  expense  of  government  but 
they  do  not  show  definitely  where  the  increase  occurs.  These 
facts  are  available  as  indicated  by  the  appropriations  for  the  state 
government  but  not  for  a  series  of  years  for  the  local  govern- 
ments. 

The  State  Appropriations. — Table  VII,  compiled  by  the 
Legislative  Reference  Bureau  shows  the  total  appropriations 
made  by  the  legislature  annually  from  1867  to  1879  and  bien- 
nially thereafter,  to  meet  state  expenditures  and  the  percentage 
of  these  appropriations  made  for  educational  purposes,  state 
institutions  other  than  educational,  legislative,  executive  and 
judicial  expenses,  and  for  boards,  commissions  and  departments 
The  detailed  appropriations  will  be  published  in  the  Blue  Book 
now  being  prepared  by  the  Bureau. 


State  Appropriations 


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20  Report  of  Nebraska  Tax  Commission 

This  table  shows  an  almost  constant  increase  of  appropriations 
for  state  purposes.  About  50  per  cent  of  them  have  steadily  been 
made  for  educational  purposes  if  we  include  the  federal  grants 
and  the  apportionment  of  the  school  fund.  The  state  institutions 
other  than  educational  have  increased  in  number  from  two  in  1867 
to  fifteen  in  1913  and  have  on  the  average  required  about  30 
per  cent  of  the  appropriations.  During  the  past  decade  they 
have  required  a  smaller  percentage  of  the  appropriations  than 
during  the  preceding  decade;  yet  the  appropriations  for  their 
support  have  increased  from  $1,594,320  in  1903  to  $2,539,165  in 
1913.  Sums  voted  for  legislative,  executive  and  judicial  expenses 
have  almost  doubled  during  the  same  period,  rising  from  $633,336 
in  1903  to  $1,055,640  in  1913. 

Growth  of  Local  Expenses. — But  the  state  expenditures 
are  relatively  unimportant.  According  to  the  census  the  public 
expenditures  in  the  state  for  the  different  governments  were  as 
follows  in  1902: 

Amount  Per  Cent 

State $2,152,771  18.28 

Counties 3,930,373  33.36 

Cities  over  25,000  population 2,495,075  21.18 

Other  minor  civil  divisions. .              3,202,000  27.18 


Total $11,780,219       100.00 

That  is,  18.28  per  cent  of  the  public  expenditures  were  made 
through  the  state  and  81.7  per  cent  through  the  various  local 
governments.  The  relative  importance  of  state  and  local  financial 
burden  may  be  shown  in  another  way.  Of  the  total  taxes  charged 
in  1913  amounting  to  $22,487,791,  $18,816,601  or  83  per  cent 
were  for  local  uses.  No  statistics  are  available  for  showing  the 
growth  of  local  expenditures.  They  have,  however,  grown  more 
rapidly  than  the  state  expenditures. 

Where  the  Tax  Burden  Falls.  The  Assessment  of 
Property  by  Classes. — The  total  assessed  valuation,  and  the 
amount  and  per  cent  of  the  total  represented  by  real  estate,  per- 
sonal, and  railroad  property  from  1867  to  1913  are  shown  in 
Table  VIII. 


Assessed  Valuation 


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Causes  of  High  Taxes  23 

The  table  shows  that  real  estate  has  constituted  a  fairly 
constant  proportion  of  the  assessments  upon  which  the  ad  va- 
lorem taxes  have  been  based  during  the  whole  period.  This  class 
of  property  has  been  pretty  generally  in  the  neighborhood  of 
two-thirds  of  the  total.  Personalty  has  shown  greater  variation 
than  either  real  estate  or  railroad  property.  The  effect  of  the 
administrative  machinery  provided  by  the  act  of  1903  is  notice- 
able. The  total  assessment  was  raised  in  1904,  the  first  year  under 
the  new  act,  by  $106,000,000,  or  56  per  cent.  But  the  increase  was 
uneven.  Sixty  million  of  the  increase  was  borne  by  real  estate,  an 
increase  of  49  per  cent;  personal  property  was  pushed  up  60  per 
cent  and  railroad  property  68  per  cent.  The  relative  proportions 
remained  fairly  constant  during  the  next  four  years.  The  re-ad- 
justment in  1908,  when  a  new  real  estate  assessment  was  made, 
gave  a  markedly  higher  percentage  to  real  estate  and  this  was 
still  further  increased  by  the  assessment  of  1912.  Both  personal 
and  railroad  property  have  represented  a  decreasing  percentage 
of  the  total  assessment  since  1907. 

Causes  of  High  Taxes. — The  increase  of  taxes  shown  in 
these  tables  is  not  peculiar  to  Nebraska.  Since  about  1885  there 
has  been  a  marked  increase  in  state  and  local  revenues  throughout 
the  country  and  in  fact  throughout  the  western  world.  This 
growth  has  been  especially  marked  during  the  last  dozen  years. 
On  every  hand  the  complaint  is  made  of  the  increasing  burden 
of  taxation.  For  a  quarter  of  a  century  writers  on  public  finance 
have  called  attention,  sometimes  with  alarm,  to  the  growth  of 
public  expenditures.  In  the  main,  however,  this  increase  is  looked 
upon  as  a  natural  growth.  The  functions  of  government  have 
been  constantly  widening;  all  the  old  services  are  continued;  new 
ones  are  constantly  being  undertaken;  and  new  and  old  are  being 
conducted  on  a  higher  plane  than  formerly.  Citizens  are  no  longer 
content  with  mere  room  and  convenience,  but  demand  something 
of  elegance,  in  their  public  buildings.  They  are  no  longer  satis- 
fied that  their  duty  is  performed  toward  the  unfortunate  wards 
of  the  state  by  providing  them  shelter  and  food,  but  feel  impelled 
to  make  use  of  all  the  methods  of  modern  science  to  remove  their 
abnormalities  and  restore  them  when  possible  to  the  usual  paths 
of  life.  Such  expenditures,  so  far  as  they  result  in  reformation 
and  restoration  to  health,  aside  from  humanitarian  considera- 
tions, are  properly  held  to  be  justified  by  their  economic  results. 


24  Report  of  Nebraska  Tax  Commission 

The  same  is  true  of  the  recent  tremendous  increase  in  expenditures 
for  education.  There  is  no  intention  of  placing  education  on  a 
merely  utilitarian  basis,  but  such  expenditures  are  in  large  part 
directed  toward  the  development  of  those  physical  and  intel- 
lectual powers  of  youth  upon  which  industrial  prosperity  must 
rest.  They  are  therefore  looked  upon  not  merely  as  the  satis- 
faction of  a  claim  which  the  individual  has  upon  society  but  as  an 
investment  from  which  society  secures  a  return  in  numerous  ways. 
There  is  the  same  sort  of  justification  for  expenditures  for  the 
preservation  of  the  public  health  and  numerous  other  activities 
which  directly  or  indirectly  add  to  the  producing  power  of  the 
people. 

Increase  of  Expenditures  and  the  Rise  in  Prices. — This 
normal  growth  of  expenditure  due  to  enlarging  the  public  services 
has  been  influenced  by  the  change  that  has  taken  place  since 
1897  in  the  general  price  level.     The  continuous  decline  in  the 
value  of  money  has  meant  a  "higher  cost  of  living"  for  govern- 
ments as  well  as  for  individuals.    They  have  had  to  pay  higher 
prices  for  materials  for  construction  and  supplies  just  as  in- 
dividuals have.     Increases  in  public  salaries  have  been  made, 
though  unevenly  and  probably  not  in  the  same  degree  that  private 
salaries  have  risen.    We  have  accurate  data  for  one  large  class 
of  public  servants,  the  teachers  in  the  public  schools.    There  has 
been  an  increase  in  the  average  monthly  wage  for  male  teachers 
from  $46.25  in  1900  to  $79.02  in  1912;  and  for  female  teachers 
from  $36.90  to  $55.31  during  the  same  period.     This  shows  for 
the  women  teachers  an  increase  of  a  little  less  than  50  per  cent  in 
average  monthly  wages.    During  the  same  time  the  index  number 
of  food  stuffs  has  risen  in  the  north  central  states  of  which  Ne- 
braska is  one,  from  102.5  in  1900  to'  170.0  in  1913.    It  seems  prob- 
able, therefore,  that  teachers'  salaries  have  not  risen  as  fast  as 
the  cost  of  living,  while  as  stated  above  many  salaries  of  public 
officials  have  not  risen  at  all.    The  increase  of  expenditures  due  to 
the  rise  of  prices  will  in  time  cease;    but  the  conditions  calling 
for  co-operative  activities  through  the  state  and  local  governments 
are  likely  to  continue.    This  does  not  mean  that  the  continued  en- 
largement of  the  functions  of  the  state  is  inevitable,  but  unless 
there  is  a  marked  change  in  the  prevailing  political  philosophy, 
and  of  such  change  there  is  now  no  sigh,  these  functions  will 
continue  to  be  enlarged  and  they  will  demand  a  continued  in- 
crease of  the  public  revenues. 


The  Outlook  25 

The  Outlook;  Need  of  Reform. — The  foregoing  statistics 
show  what  has  been  the  course  of  public  expenditures  and  the 
tax  levies  during  the  last  thirty  or  forty  years  and  indicate  what 
may  reasonably  be  expected  in  the  future.  Attention  is  called 
particularly  to  the  great  increase  in  the  levies  since  1902.  While 
the  population  has  been  increasing  at  the  rate  of  about  12,000  a 
year  the  ad  valorem  tax  levies  have  been  increasing  at  the  rate  of 
about  $1,000,000  a  year;  or,  to  put  the  situation  in  the  form  of 
percentages,  the  population  has  increased  at  the  rate  of  but  little 
more  than  one  per  cent  a  year,  the  ad  valorem  levies  have  in- 
creased at  an  annual  average  of  about  12  per  cent  per  year.  The 
comparative  growth  of  taxable  wealth  and  the  levies  has  been 
indicated  above.  Such  a  remarkable  over-reaching  of  the  popula- 
tion and  wealth  of  the  state  by  the  tax  levies  cannot  of  course 
continue  indefinitely.  But  services  already  undertaken  will 
doubtless  be  continued  and  even  though  no  others  be  undertaken 
at  the  public  expense,  the  cost  of  maintaining  this  is  certain 
to  increase. 

In  this  situation  two  lines  of  action  are  clearly  demanded: 
First,  a  more  efficient  control  of  expenditures  in  the  state  and 
the  local  governments. 

Second,  a  fairer  and  more  equitable  adjustment  of  the  tax 
burden.  It  is  with  the  second  phase  of  the  revenue  problem  that 
this  Commission  is  especially  charged;  but  the  control  of  ex- 
penditures is  so  closely  connected  with  the  raising  of  revenue 
that  a  brief  discussion  of  that  subject  will  not  be  inappropriate. 
1.  Better  Control  of  Appropriations. — The  amount  of 
the  expenditures  authorized  by  the  various  legislative  bodies, 
state  and -local,  vested  with  power  to  make  appropriations  of 
public  funds,  determines  the  amount  of  taxes  to  be  raised.  Econ- 
omy in  financial  management  must,  therefore,  begin  with  the 
appropriations.  Every  one  knows  how  difficult  it  is  to  control  ex- 
penditures under  any  system  where  representatives  are  given 
power  to  determine  how  much  public  money  shall  be  raised  and 
for  what  purposes  it  shall  be  spent.  It  is  one  of  the  most  per- 
plexing problems  connected  with  the  administration  of  the 
federal  finances,  it  shows  itself  in  every  session  of  the  legislature, 
and  is  constantly  present  in  all  the  representative  local  govern- 
ments. From  the  point  of  view  of  organization  the  most  im- 
portant defect  in  our  financial  methods  lies  in  the  great  diffusion 


26  Report  of  Nebraska  Tax  Commission 

of  authority,  and  therefore  of  responsibility,  in  financial  matters. 
Thus,  the  responsibility  for  the  amount  and  direction  of  expendi- 
tures is  divided  between  two  chambers.  The  appropriation  bills 
originate  in  the  House,  not  with  one  committee,  but  with  eight 
committees,  each  seeking  to  get  as  much  as  possible  for  the  ser- 
vices under  its  care.  These  committees  rely  upon  heads  of  de- 
partments, bureau  chiefs  and  superintendents  for  estimates  of 
the  needs  of  the  various  services.  All  these  estimates  pass  through 
the  office  of  the  secretary  of  the  treasury  but  he  has  no  power  to 
modify  them  for  any  department  except  his  own.  No  person  or 
body  of  persons  is  responsible  for  the  estimates  as  a  whole  or  for 
determining  the  relative  importance  of  the  demands  made  upon 
the  treasury.  This  is  left  to  be  worked  out  by  the  eight  com- 
mittees having  power  to  prepare  appropriation  bills.  Their  con- 
clusions are  subject  to  amendment  by  the  House  on  the  motion 
of  any  member,  and  the  action  of  the  House  is  subject  to  revision 
by  the  Senate.  Moreover,  an  independent  committee  is  charged 
with  the  task  of  putting  into  form  legislation  for  providing  the 
ways  and  means  of  meeting  the  appropriations.  Consequently 
in  the  management  of  federal  expenditures  there  is  no  such  thing 
as  centralized  control,  no  officer  or  group  of  officers  charged  with 
the  duty  of  keeping  income  and  outgo  together  and  determining 
the  relative  amounts  to  be  expended  for  different  purposes;  in 
a  word,  no  way  is  provided  for  fixing  responsibility  in  financial 
matters  except  in  the  most  general  and  ineffective  way  upon  the 
"party  in  power"  or  the  " administration."  l 

The  state  government  works  under  the  same  kind  of  system, 
or  rather  lack  of  system.  Estimates  of  the  amounts  needed  for  the 
next  biennium  have  heretofore  been  filed  with  the  State  Auditor 
by  heads  of  departments,  superintendents  of  institutions,  heads 
of  commissions,  boards,  associations,  surveys  and  other  state 


1  That  those  connected  with  the  management  of  the  federal  finances  are 
awake  to  the  serious  defects  of  our  system  is  shown  by  the  repeated  efforts 
at  reform  in  recent  years.  The  following  from  a  speech  in  the  House  by  the 
chairman  of  the  Ways  and  Means  Committee  in  September  1914  is  signifi- 
cant: "It  has  been  my  opinion  for  years,  and  it  is  now,  that  the  only  way 
we  can  work  out  economy  and  efficiency  at  the  same  time  is  for  the  govern- 
ment to  centralize  control  of  appropriations  in  control  of  one  committee  in 
the  House  and  in  the  Senate,  or  by  adopting  a  budget  system  that  will  have 
control  over  all  committees;  and  I  believe  that  the  day  is  not  far  distant  when 
such  a  system  will  be  inaugurated " 


Better  Control  of  Appropriations  27 

services,  seventy  or  eighty  in  number,  which  look  to  the  legisla- 
ture for  support.  The  estimates  for  the  state  institutions  will 
hereafter  be  filed  by  the  Board  of  Commissions  in  charge  of  them. 
The  function  of  the  Auditor  is  purely  clerical.  He  simply  ar- 
ranges these  estimates  for  submission  to  the  legislature  in  such 
form  as  to  make  possible  a  comparison  of  the  sums  appropriated 
for  the  last  three  or  four  bienniums  with  the  sums  asked  for. 
The  Auditor  also  presents  an  estimate  of  the  revenues  based  on 
existing  laws.  He  has  no  power  to  make  recommendations  con- 
cerning either  revenue  or  expenditures.  The  task,  therefore,  of 
providing  for  the  numerous  needs  of  the  state  devolves  upon 
the  legislature,  meeting  for  a  period  of  sixty  days,  overwhelmed 
with  a  mass  of  general  legislation,  to  determine  upon  the  expendi- 
ture of  six  or  eight  millions  of  dollars  and  apportion  it  to  various 
state  services  often  in  the  minutest  detail.  It  is  a  task  no  legisla- 
tive body  meeting  once  in  two  years  for  a  short  term  can  ade- 
quately perform.  Hearings  may  be  held,  junkets  may  be  arranged 
for,  reports  may  be  studied  by  a  few;  but  in  the  end  the  legisla- 
ture is  compelled  to  accept  the  recommendations  of  heads  of 
departments  and  superintendents  and  the  sums  asked  for  are 
granted  and  placed  at  the  disposal  of  the  executive  officers. 

This  complete  separation  of  the  executive  and  the  legisla- 
tive branches  of  government  is  one  of  the  peculiar  features  of 
American  institutions  and  is  the  cause  of  many  of  our  financial 
difficulties.  In  many  European  countries  financial  administra- 
tion is  organized  on  sounder  principles.  In  England,  for  in- 
stance, from  which  our  own  institutions  were  chiefly  inherited, 
the  evolution  of  two  centuries  has  brought  the  executive  and 
legislative  branches  closer  together  till  now  they  are  practically 
one.  The  same  situation  exists  in  the  Canadian  governments 
both  dominion  and  provincial.  The  chief  heads  of  departments 
are  also  members  of  the  legislature.  They  constitute  "the 
government."  They  decide  upon  the  needs  of  the  public  service 
and  ask  for  appropriations  sufficient  to  meet  them.  They  also 
propose  plans  for  raising  the  necessary  revenue.  This  compre- 
hensive plan  for  expenditures  and  revenues  for  the  year  con- 
stitutes the  budget.  It  is  presented  to  the  legislature  by  the 
finance  minister  as  "the  government's  program  for  the  year." 
While  the  ministry's  plan  is  open  to  discussion  and  criticism, 
any  important  modification  of  the  program  by  the  legislature 


28  Report  of  Nebraska  Tax  Commission 

would  be  regarded  as  a  vote  of  "want  of  confidence/'  the  min- 
instry  would  resign  and  a  new  ministry  would  be  called  to  present 
a  program  in  conformity  to  'the  wishes  of  the  majority.  Bills 
carrying  appropriations  for  public  purposes:  are  not  brought  in 
by  private  members  at  all,  and  only  the  leaders  of  the  "opposi- 
tion" think  of  proposing  amendments  to  the  .government's 
program.  Under  such  a  system  income  and  expenditures  are 
kept  together  with  remarkable  precision;  all  the  services .  are 
looked  upon  as  one  great  undertaking  and  a  balance  is  preserved 
between  them  in  the  general  public  interest;  and  the  adminis- 
trative officers  who  devise  the  program  and  carry  it  through  the 
legislature  are  also  charged  with  the  duty  of  executing  it.  Such 
a  centralized  control  over  expenditures  appears  on  first  examina- 
tion very  undemocratic;  but  as  it  operates  in  countries  where 
the  people  are  steady  enough  politically  to  use  the  system,  it  has 
proven  very  responsive  to  the  popular  will.  It  offers  no  oppor- 
tunity, it  is  true,  for  the  individual  legislator  to  secure  an  appro- 
priation for  "his  district"  by  log-rolling  or  otherwise.  .The 
government's  plan  must  be  accepted  or  rejected  as  a  whole  or 
with  but  slight  modifications.  No  increase  of  appropriations  can 
be;  made  at  all  except  on  the  initiative  of  the  ministry,  and  no  im- 
portant decreases  would  be  tolerated .  since  that  would  require 
a  ( hange  in  the  program. 

This  system  of  responsible  government  furnishes  the' most 
efficient  means  of  controling  the  finances  yet  devised  in  demo- 
cratic countries.  If  it  could  be  adopted  here  it  would  undoubtedly 
remove  many  grave  evils  in  our  financial  system.  But  the  Ameri- 
can theory  of  a  separation  of  the  executive  and  legislative  branches 
and  the  practice  of  electing  officials  for  a  fixed  term,  stands  in  the 
way  of  adopting  the  British  system  here.  That  system  has  been  an 
evolution  and  any  effective  system  of  financial  control  that  may 
be  worked  out  here  must  come  by  the  same  process.  A  form  of 
semi-responsible  government  is  being  developed  in  our  cities 
through  the  adoption  of  the  commission  plan.  Doubtless  some- 
thing similar  to  the  commission  plan  will  be  experimented  with 
soon  in  our  county  governments,  and  proposals  are  not  wanting 
for  applying  the  principle  to  the  state  governments. 

Meanwhile  some  progress  has  been  made  in  Nebraska  toward 
centralizing  control  over  estimates  for  state  institutions  by  the 
creation  of  the  Board  of  Commissioners  of  State  Institutions, 


Better  Control  of  Appropriations  29 

popularly  called  the  Board  of  Control.  Fifteen  institutions  have 
been  placed  under  that  Board.  They  required  appropriations 
in  1913  amounting  to  $2,539,165  or  28  per  cent  of  the  total  state 
appropriations.  It  will  be  a  great  gain  for  efficient  control  of 
the  finances  of  these  institutions  if  the  Board  shall  be  made  the 
sole  spokesman  to  the  legislature  for  them.  The  same  principle 
should  apply  to  interests  under  the  control  of  the  Regents  of  the 
University  and  of  the  State  Board  of  Education.  If  the  zeal  of 
members  for  expenditures  in  their  district  is  not  promptly  and 
effectively  restrained  by  the  legislators,  the  value  of  the  Board 
acting  as  an  impartial  body  in  determining  the  relative  needs  of 
the  services  under  its  management,  will  be  greatly  impaired. 

In  the  search  for  some  official  upon  whom  to  place  the  duty 
of  presenting  to  the  legislature  a  unified  program  for  the  admin- 
istration of  the  state  government  the  Joint  Committee  on  Legisla- 
tive Procedure  has  concluded  that  the  Governor  can  best  perform 
that  task.  That  Committee  makes  the  following  recommenda- 
tion: 

"The  governor  represents  more  completely  than  any  other 
officer  the  general  administrative  policy  of  the  state.  Upon  his 
character  and  ability  more  than  upon  any  other  one  person  de- 
pends the  success  of  the  state  government.  We  believe  it  should 
be  made  his  duty  to  prepare  and  recommend  to  the  legislature 
the  budget  of  necessary  expenses  and  income  upon  which  he  is 
willing  to  stake  his  judgment  and  reputation  as  the  chief  execu- 
tive officer  of  the  state." 

Such  an  arrangement  cannot  of  course  be  expected  to  ac- 
complish all  that  is  to  be  desired  in  the  reform  of  financial  admin- 
istration; but,  that  much  good  may  be  accomplished  through  it 
by  energetic  governors,  especially  by  those  serving  a  second  term 
working  in  close  co-operation  with  the  Board  of  Control,  the 
University  Board  of  Regents,  the  State  Board  of  Education  and 
the  heads  of  the  various  departments,  can  hardly  be  doubted. 
It  must  be  remembered,  however,  that  a  governor  just  coming 
into  office  is  as  helpless  as  the  legislature  itself  in  passing  upon 
details  of  policy  and  expenditure  for  the  varied  interests  of  the 
state.  He  can  in  no  sense  take  the  place  of  a  finance  minister  in 
a  genuine  budget  system. 


30  Report  of  Nebraska  Tax  Commission 

The  defects  of  the  financial  organization  of  the  state  govern- 
ment and  the  proposals  for  reform  in  that  field  have  been  dwelt 
upon  because  the  evils  of  loose  administration  from  their  spec- 
tacular character  have  attracted  wide  attention.  But  as  shown 
above  the  state's  expenditures  are  relatively  unimportant  com- 
pared with  those  of  the  local  governments  and  opportunities  for 
introducing  economies  are  correspondingly  small.  Tested  by 
the  tax  levies  the  local  governments  are  on  the  average  seven 
times  as  important  as  the  state  government;  and  in  cities  where 
the  levies  often  run  up  to  100  mills  or  more  of  the  assessed  valua- 
tion, the  local  governments  are  fourteen  or  fifteen  times  as  im- 
portant, from  the  tax-paying  point  of  view,  as  the  state  govern- 
ment. The  great  field  for  economy  in  financial  administration 
lies,  therefore,  in  the  governments  nearest  to  the  citizen.  It  is 
a  commonplace,  however,  that  citizens  know  less  about  the 
finances  of  these  governments  than  they  do  of  those  farther  from 
home.  There  is  in  fact  a  strange  lack  of  interest  in  the  local 
finances.  This  is  due  to  a  variety  of  causes  which  need  not  here 
be  discussed.  But  it  may  be  safely  stated  that  efforts  to  check 
the  growth  of  the  tax  burden  that  are  not  chiefly  directed  toward 
a  study  of  local  expenditures  will  largely  fail  of  its  end. 

At  the  Denver  meeting  of  the  National  Tax  Association  held 
in  September,  1914,  the  report  of  a  committee  on  economy  and 
expenditures  was  read,  the  recommendations  of  which  we  give 
below  as  a  conclusion  of  this  discussion.  These  recommendations 
meet  fully  the  approval  of  this  Commission: 

"To  accomplish  this  result  (more  efficient  financial  control) 
it  is  necessary  to  overcome  the  existing  indifference  of  the  elec- 
torate and  then  to  ascertain  where  economies  can  be  effected 
and  how  successfully  introduced.  To  these  ends  we  recommend: 

First,  that  this  association  adopt  a  resolution  urging  con- 
gress to  direct  the  census  bureau  to  publish  annually  for  a  se- 
lected group  of  states,  counties,  towns,  villages  and  cities,  statis- 
tics of  expenditure,  taxation,  public  debt  and  wealth,  including 
in  this  group — similar  to  the  registration  area  used  in  vital 
statistics— those  states  and  political  subdivisions  whose  financial 
accounts  are  published  promptly  and  in  such  form  as  will  permit 
of  consolidated  statement. 

Second,  that  a  resolution  be  passed  urging  every  state  legis- 
lature which  has  not  already  done  so  to  require  all  political  sub- 
divisions to  publish  annually  a  brief  statement  showing  the  in- 
crease or  decrease  in  expenditures,  receipts,  taxes  and  public 


Better  Control  of  Appropriations  31 

debt;  and  that  to  this  end  (a)  a  member  of  the  National  Tax 
Association  be  appointed  in  each  state  to  work  for  such  legisla- 
tion and  (b)  that  this  committee  be  continued  in  order  to  keep 
in  touch  with  these  representatives,  supply  them  with  laws 
passed  in  other  states,  and  such  suggestions  and  assistance  as  it 
may  be  possible  to  render. 

Third,  to  measure  the  governmental  performance  and  as- 
certain where  economies  may  be  introduced.  National  and  state 
governments  should  establish  bureaus  of  efficiency  properly 
manned  and  equipped.  Their  activities  may  wisely  be  supple- 
mented by  the  work  of  private  efficiency  bureaus,  taxpayers' 
associations  and  the  like.  The  public  efficiency  bureaus  referred 
to  may  be  associated  with  the  legislature  or  chief  executive  de- 
partment or  given  a  quasi-independent  status  as  a  separate  com- 
mission— as  the  circumstances  of  particular  times  and  places 
may  require — but  they  should  be  so  constituted  as  to  have  the 
freest  access  to  public  offices,  do  their  work  continuously,  and  have 
their  recommendations  treated  as  other  than  mere  academic 
proposals.  They  must  be  made  an  integral  and  permanent  part 
of  government,  bent  upon  reducing  cost. 

Fourth,  to  make  such  bureaus  effective  modern  government 
must  be  simple  and  the  existing  diffusion  or  power  and  responsi- 
bility corrected.  A  short  ballot,  and  those  modifications  which 
logically  go  along  with  it,  should  be  introduced.  A  single  legisla- 
tive chamber,  reduction  in  the  number  of  elective  executive 
officers,  closer  relationship  between  legislative  and  executive 
departments  of  government,  a  budget  which  emphasizes  the 
spirit  but  wastes  no  time  and  effort  on  the  form  of  this  procedure — 
are  probably  all  necessary  accompaniments  of  any  movement 
permanently  to  reduce  public  expenditures  and  increase  public 
efficiency. 

Fifth,  to  get  these  movements  under  way  and  overcome 
existing  indifference,  a  systematic  propaganda  for  the  betterment 
of  existing  conditions  along  the  lines  named  should  be  introduced. 
Such  a  movement  can  offend  few,  if  any,  persons  or  interests 
worth  considering.  Practically  every  one  agrees  that  whatever 
functions  the  government  undertakes  should  be  performed  as 
economically  as  possible.  We  recommend  accordingly  the  or- 
ganization of  a  national  taxpayers'  efficiency  association — or  the 
assumption  of  this  work  by  the  National  Tax  Association- 
designed  to  awaken  the  people  to  the  menace  involved  in  the 
growth  of  expenditures,  secure  the  publication  of  simple  under- 
standable statistics  on  this  point,  point  out  where  economies  may 
be  effected,  inform  civil  divisions  in  particular  of  the  bureaus  or 
agencies  from  which  they  may  secure  expert  help  in  reorganizing 
their  accounts  and  reducing  cost,  and  in  short  to  spread  and 
strengthen  by  concentrating  the  work  now  being  developed  by 
the  public  and  private  efficiency  bureaus  already  in  existence. 


32  Report  of  Nebraska  Tax  Commission 

The  National  Assembly  of  Civil  Service  Commissioners  has 
already  adopted  a  resolution  recommending  the  creation  of  a 
central  agency  or  bureau  to  supply  information  and  expert  assis- 
tance to  the  various  civil  service  commissions  throughout  the 
country.  This  resolution  further  recommended  the  consolidation 
of  such  a  bureau  with  a  national  efficiency  bureau  and  the  close 
co-operation  of  local  efficiency  bureaus  and  civil  service  commis- 
sions. 

It  is  not  desired  to  interfere  or  compete  with  this  work.  The 
essential  task  of  the  taxpayers'  association  referred  to  would  be 
to  awaken  a  demand  for  such  work.  A  widespread  desire  for 
greater  economy  and  generous  public  support  of  those  changes 
necessary  to  effect  economy  are  quite  as  necessary  and  even  more 
difficult  to  achieve  than  the  technical  work  of  introducing  econom- 
ical organization  and  operation  itself.  Such  work  can,  profitably 
to  the  taxpayers  of  this  country,  be  undertaken  by  this  association 
or  some  allied  body. 

Finally  we  recommend  the  adoption  of  tax  limitation  laws 
similar  to  those  existing  in  the  state  of  Colorado.  Such  laws 
should  contain  in  substance  provisions  similar  to  the  following: 

(a)  The  taxes  levied  by  any  political  subdivision  should 
not  exceed  those  of  the  preceding  year  by  more  than,  say  5  per  cent 
except  in  cases  of  emergency. 

(b)  Whether  an  emergency  exists  shall  be  determined  by 
some  independent  body,  such  as  the  courts,  state  tax  commission, 
or  board  consisting  of  the  principal  elective  state  officers. 

(c)  In  cases  of  emergency  an  increase  in  taxes  not  to  exceed, 
say,  15  per  cent  may  be  authorized  by  the  above  board  or  agency. 

(d)  But  any  increase  beyond  the  limit  last  named  must  be 
ratified  by  referendum  vote  within  the  political  subdivisions  con- 
cerned." 

2.  Adjustment  of  the  Tax  Burden. — It  cannot  be  said, 
however,  that  the  taxes  in  Nebraska  constitute  a  grievous  burden 
at  the  present  time.  The  average  levy  of  47.25  mills  for  the  year 
1913  may  on  its  face  seem  alarming.  But  accepting  the  "actual 
value"  found  by  the  assessors  as  the  true  value,  this  apparently 
high  levy  amounts  to  but  $9.55  per  thousand.  It  is  well  known, 
however,  that  the  "actual  value"  of  the  assessors  does  not  repre- 
sent the  true  value  of  the  property  listed.  The  rough  estimate 
given  above  of  true  value  would  make  the  ad  valorem  taxes 
amount  to  but  $7.40  per  thousand.  It  is  quite  clear  that  the 
chief  difficulty  with  the  taxes  is  not  that  the  average  burden  is  too 
great,  but  that  it  is  not  properly  apportioned.  Here  lies  con- 
fessedly the  most  difficult  problem  in  the  realm  of  public  finance. 
We  make  no  claims  of  having  reached  a  satisfactory  solution  of 


Adjustment  of  Tax  Burden  33 

it;  but  we  believe  that  if  the  recommendations  made  in  the 
following  chapters  are  adopted  by  the  legislature  the  result  will 
be  in  the  direction  of  a  much  fairer  distribution  of  the  burden  of 
supporting  the  government. 


34  Report  of  Nebraska  Tax  Commission 


CHAPTER  II 
THE  PRESENT  REVENUE  SYSTEM 

Requirements  of  a  Good  Revenue  System. — It  is  im- 
possible fairly  to  consider  the  present  revenue  system  of  the 
state  of  Nebraska,  without  first  adverting  to  the  general  char- 
acteristics of  a  good  revenue  system.  It  will  be  conceded  by  all, 
that  a  good  revenue  system  should,  among  other  things,  perform 
the  following  functions,  to-wit: 

1.  Provide  for  a  fair  and  equitable  levy. 

2.  Provide  for  prompt  and  economical  collection  of  the 
necessary  revenue. 

3.  Provide  for  direct  and  certain  means  of  expenditure  and 
distribution  after  collection. 

4.  Provide  for  the  taking  of  no  more  than  the  necessary 
toll  from  the  people,  and  at  times  most  convenient  to  the  tax 
payers. 

5.  It  should  be  elastic  enough  in  its  terms  as  to  limitations 
of  levy,  use  of  funds  and  forms  of  administration,  not  only  to 
cover  standard  needs  and  usual  demands,  but  also  to  meet  or- 
dinary emergencies. 

6.  It  should  by  its  own  terms,  compel  efficient  administra- 
tion, so  tempered  with  fairness  and  impartiality  as  to  secure  the 
law  itself  against  resentment,  opposition  and  evasion  so  far  as 
it  is  possible  to  do. 

System  Prior  to  1903. — Measured  by  the  above  require- 
ments, it  is  clear  to  most  minds  that  the  present  revenue  system 
in  the  state  of  Nebraska  is  seriously  deficient.  During  the  past 
decade,  since  the  enactment  of  the  revenue  law  of  1903,  the  best 
friend  of  that  measure  would  have  to  confess  to  failure  and  dis- 
appointment in  all  of  the  above  required  details.  The  old  revenue 
law,  adopted  when  the  state  was  young,  was  of  course  unfitted 
for  the  larger  growth  and  development  that  followed  in  the  first 
generation  after  its  adoption.  The  law  was  poorly  administered, 
property  was  taken  for  assessment  in  various  counties  at  any- 
where from  one-fourth  to  one-tenth  of  its  actual  value.  The 
collection  scheme  was  a  failure.  Tax  deeds  to  real  estate  were 
void.  Every  municipality,  school  district  and  sub-division 
might  have  money  in  one  pocket  and  be  bankrupt  in  all  others. 


The  Act  of  1903  35 

Dissatisfaction,  unrest  and  strife  developed  under  its  operation. 
In  1897  and  1899,  the  state  association  of  county  commissioners 
and  supervisors  urged  the  legislature  to  amend  the  law  radically 
for  the  correction  of  existing  abuses;  to  provide  for  just  and  equit- 
able methods,  and  to  equalize  the  tax  burden  as  far  as  possible. 
The  Pollard  bills  of  1897  and  1899  were  aimed  in  that  direction 
but  were  defeated  and  it  was  not  until  1903  that  a  legislature 
was  willing  to  give  the  time  and  labor  necessary  to  make  what 
may  be  called  a  complete  revision  of  the  law.  Our  present  system 
consists  of  the  Act  of  1903,  with  a  few  amendments  that  have 
been  since  adopted.  We  shall  proceed  to  consider  that  system 
as  it  exists  at  this  time. 

The  Act  of  1903. — The  chief  features  or  characteristics  of 
the  present  system  which  stand  out  in  bold  relief  are  about  as 
follows: 

1.  That  all  property  not  expressly  exempt  is  subject  to 
taxation,  but  while  listed  at  its  actual  value,  it  is  only  assessed 
at  20  per  cent  or  one-fifth  of  its  actual  value. 

2.  All  kinds  of  property  are  treated  as  of  the  same  economic 
significance  for  purposes  of  taxation. 

3.  That  the  law  separates  the  general  or  personal  property 
tax  from  the  taxes  on  real  estate  and  declares  the  same  to  be 
a  lien  at  a  different  date  and  provides  for  the  same  drawing 
interest    from   a    different  date  arid  for  different  methods  of 
enforcement. 

Under  the  present  system,  the  taxes  on  real  estate  become 
a  lien  against  the  property  on  October  first  of  the  year  in  which 
they  are  assessed,  while  personal  property  taxes  do  not  become 
a  lien  until  November  first  of  the  same  year.  Real  estate  taxes 
do  not  draw  any  interest  whatever  until  May  first  of  the  year 
following  their  levy;  personal  property  taxes  draw  interest  from 
and  after  December  first  of  the  year  in  which  they  are  levied 
and  the  distress  warrant  system  is  used  for  their  collection  and 
enforcement.  Under  our  system  general  taxes  become  the  first 
lien  on  property,  while  special  assessment  or  local  improvement 
taxes  are  secondary  liens.  The  administration  locally,  is  ordi- 
narily through  a  county  assessor,  although  the  law  permits  the 
abolition  of  the  county  assessor.  Two  theories  now  have  en- 
thusiastic adherents  in  the  matter  of  making  local  assessment. 
There  are  many  who  still  contend  that  the  precinct  or  township 
assessor  ought  to  be  elected  in  order  to  preserve  local  autonomy 


36  Report  of  Nebraska  Tax  Commission 

or  home  rule,  but  the  better  view  seems  to  prevail  that  adminis- 
tration under  appointed  deputies  will  inevitably  result  in  more 
uniformity,  more  intelligent  valuation  and  in  general  a  more  just 
and  equitable  assessment.  The  appointive  system  for  local 
deputy  assessors  had  hardly  been  tried  out  in  this- state  until  the 
law  was  changed  and  required  the  election  of  deputy  assessors 
every  two  years,  and  providing  that  vacancies  could  be  filled  by 
appointment  by  the  county  assessor  and  the  county  board. 
Where  the  local  assessor  is  elected  instead  of  appointed,  it  seems 
that  the  rule  obtains  that  his  supporters  at  the  election  expect 
him  to  see  that  his  precinct  or  township  is  assessed  on  the  lowest 
possible  basis  and  there  is  therefore,  a  kind  of  competition  among 
the  assessors  of  the  various  precincts  or  townships  in  each  county 
in  which  the  officer  seeks  to  merit  re-election  or  promotion  in 
office  by  convincing  his  constituents  that  they  have  been  assessed 
for  the  lowest  possible  amount.  It  is  not  probable  that  the  local 
man  has  any  particular  advantage  in  the  way  of  knowledge  or  in- 
formation which  can  not  readily  be  obtained  by  the  appointed 
deputy  and  while  the  law  does  not  place  any  precise  penalty  upon 
undervaluation,  the  local  valuation  and  assessment  will  always 
be  lacking  in  uniformity  and  fairness  until  the  machinery  is  or- 
ganized so  that  each  county,  under  the  direction  of  a  state  tax 
commission,  can  obtain  and  if  need  be,  compel  absolute  uniformity 
in  the  valuation  of  land  and  personal  property.  Special  atten- 
tion was  given  in  the  enactment  of  the  present  law  to  the  taxa- 
tion of  insurance  and  surety  companies,  corporations,  railroads 
and  car  companies  and  other  public  service  or  quasi  public  service 
corporations  and  associations.  The  law  as  it  now  exists  is  claimed 
to  be  unsatisfactory  by  each  and  all  of  the  representatives  of 
such  interests,  while  on  the  other  hand  the  common  people  and 
plain  tax  payers  maintain  that  these  interests  should  be  taxed 
more  heavily  than  they  are  at  present. 

Objections  to  Present  System. — It  would  be  impossible 
in  this  short  chapter  to  detail  the  many  objections  and  criticisms 
found  to  the  present  system,  but  a  few  may  be  mentioned  here 
for  the  purpose  of  showing  how  a  new  revenue  law  within  the 
short  space  of  ten  years,  became  a  pronounced  failure.  With 
one  accord  the  officers  and  the  tax  payers  state  that  the  present 
law  is  inadequate  for  the  purpose  of  getting  intangible  property, 
credits,  moneys  on  deposits  and  in  hiding  in  sundry  places.  It 


Objections  to  Present  System  37 

is  likewise  urged  that  the  exemption  of  household  personal 
property  should  be  permitted  so  that  the  non-productive  property 
necessary  for  each  and  every  family  may  be  relieved  from  taxa- 
tion. Under  the  present  law  there  is  but  little  exempt  and  this 
consists  of  the  property  of  the  state,  county,  the  municipal  cor- 
porations and  such  other  property  as  may  be  used  exclusively  for 
agricultural  and  horticultural  societies,  religious,  cemetery  and 
charitable  purposes.  In  addition  to  this,  deductions  may  be 
made  on  account  of  easements  for  highways,  etc.,  depreciating 
property  and  a  further  exemption  is  allowed  in  that  the  value 
arising  from  live  fences,  forest  trees,  etc.,  planted  on  lands  shall 
not  be  taken  into  account. 

A  large  portion  of  the  tax  paying  public  believes  and  signifies 
its  desire  to  have  at  least  $200  in  household  goods  and  furniture 
exempt  to  the  head  of  the  family  from  taxation.  The  Commission 
believes  this  worthy  of  consideration  by  the  legislature  in  the 
event  of  the  adoption  of  the  Norton  amendment,  which  will  per- 
mit reasonable  exemptions  to  be  made. 

Another  defect  that  should  be  removed  is  the  provision  for 
a  fractional  assessment.  There  seems  no  sufficient  reason  for 
assessing  property  at  one-fifth  of  its  value. 

Every  economist  and  student  of  taxation  has  seemingly 
reached  the  conclusion  today  that  real  estate  and  personal  prop- 
erty should  be  assessed  at  its  full  value  and  to  bring  that  about 
without  damage  or  injury  under  the  present  system,  we  should 
have  an  amendment  to  the  constitution  making  reduction  in  the 
maximum  mill  levy  so  that  excessive  taxation  would  not  be  im- 
posed upon  the  increased  assessed  valuation  when  passing  from  a 
20  per  cent  assessed  valuation  to  a  100  per  cent  valuation.  Per- 
sonal property  taxes  in  the  language  of  many  critics  should  be- 
come a  lien  the  same  as  real  estate  taxes,  from  October  first,  and 
the  law  ought  to  be  amended  accordingly.  General  criticism  has 
been  aimed  at  the  present  system  on  account  of  its  requiring  all 
taxes  to  be  paid  in  one  installment.  Many  states  have  success- 
fully adopted  a  law  whereby  taxes  may  be  paid  at  the  option  of 
the  taxpayer  in  two  installments,  at  such  times  of  the  year  as 
may  be  suitable  and  in  accordance  with  the  needs  of  the  county 
and  state  for  the  money.  A  distinct  improvement  could  be  made 
along  this  line.  County  treasurers  are  criticised  for  withholding 
remittances  to  the  state  treasurer;  not  more  than  a  half  dozen 


38  Report  of  Nebraska  Tax  Commission 

county  treasurers  now  remit  monthly.  The  state  law  at  the 
present  time  appears  to  provide  only  for  remittances  twice  per 
year  or  when  required  to  report  by  the  state  treasurer.  We  recom- 
mend that  all  county  treasurers  be  required  to  report  and  remit  by 
the  fifteenth  day  of  each  calendar  month. 

The  powers  of  the  county  assessor,  the  county  board  of 
equalization  and  those  of  the  state  board  of  equalization  are 
limited  and  inadequate.  These  powers  should  be  greatly  enlarged 
and  strengthened  by  the  adoption  of  a  law  which  will  provide 
for  a  state  tax  commission  with  powers  and  a  jurisdiction  similar 
to  those  enjoyed  by  the  tax  commission  of  the  state  of  Kansas. 
This  subject  is  dealt  with  elsewhere,  and  when  taken  in  connec- 
tion with  county  assessors  being  permitted  to  appoint  the  local 
deputy  assessors,  would  work  out  an  administrative  machinery 
with  authority  and  jurisdiction  sufficient  to  promptly  meet  and 
solve  most  perplexing  problems  of  taxation.  Many  other  criti- 
cisms may  be  justly  made  of  the  present  system,  but  as  the 
various  chapters  of  this  report  deal  with  many  of  them  specific- 
ally, it  will  be  sufficient  to  here  record  the  fact  that  the  law  of 
1903  as  amended  and  now  in  force,  is  not  generally  satisfactory 
to  public  officials,  to  tax  payers  or  the  people  at  large,  and  that 
it  does  not  provide  a  fair  and  equitable  levy;  that  it  is  inadequate 
as  to  means  and  methods  of  collection  and  distribution;  that 
the  machinery  of  administration  is  faulty  and  defective;  that 
bookkeeping  and  statistics  necessary  to  give  concise  information 
to  the  inquiring  tax  payer  are  not  to  be  found  and  that  authority 
is  so  scattered  and  decentralized  under  the  present  system  as  to 
eave  the  law  itself  without  means  of  enforcement. 


Character  and  Theory  of  the  Tax  39 


CHAPTER  III 
THE  GENERAL  PROPERTY  TAX 

I.  THE  CHARACTER  AND  THEORY  OF  THE  TAX 

The  mainstay  of  the  Nebraska  revenue  system  is  the  general 
property  tax.  The  Constitution  of  1875  requires  that  all  persons 
natural  and  artificial  shall  pay  taxes  in  proportion  to  the  value 
of  their  property.  The  rate  is  the  same  for  all  kinds  of  property. 
These  are  the  essentials  of  the  general  property  tax — the  uniform 
treatment  of  all  kinds  of  property  regardless  of  its  character. 
How  great  the  reliance  upon  these  uniform  ad  valorem  taxes  is 
will  be  seen  by  an  inspection  of  the  sources  of  revenue  within 
the  state.  In  1902,  according  to  the  United  States  census  figures, 
the  total  revenue  receipts  for  state  and  local  purposes  amounted 
to  $11,665,181.  This  included  taxes,  fees,  fines,  earnings  of  in- 
stitutions, interest  and  other  commercial  revenues.  Of  this 
amount  $8,367,298  came  from  taxes;  and  of  the  tax  revenues, 
$7,976,188,  or  93  per  cent,  came  from  the  general  property  tax. 
Since  1902  some  new  forms  of  taxes  have  been  resorted  to,  such 
as  the  capital  stock  tax  and  the  inheritance  tax;  but  the  domi- 
nant position  of  the  property  tax  has  not  been  materially  changed. 

This  state  is  not  peculiar  in  relying  upon  this  form  of  taxa- 
tion. The  general  property  tax  developed  and  became  firmly 
established  during  the  colonial  period  of  our  history,  when  there 
were  but  few  kinds  of  property,  practically  all  of  it  tangible, 
and  the  burden  of  taxes  was  light.  The  older  states  inherited 
this  revenue  system  as  they  did  their  other  institutions;  and  it 
was  natural  for  the  new  states  as  they  were  created  to  adopt  the 
methods  of  the  older  states  for  raising  revenue.  In  due  time 
Nebraska  adopted  it  and  it  has  persisted  to  the  present  day  with 
but  slight  modification. 

Under  primitive  industrial  conditions,  the  ad  valorem  system 
was  a  fairly  equitable  method  of  apportioning  the  tax  burden. 
But  with  the  economic  development  of  the  country,  the  rise  of 
corporations  with  their  issues  of  vast  amounts  of  securities,  the 
growth  of  the  credit  system /the  multiplication  of  ways  of  secur- 


40  Report  of  Nebraska  Tax  Commission 

ing  an  income  with  little  or  no  use  of  property,  and  with  the  ex- 
pansion of  state  functions  and  the  demand  for  increased  public 
revenue,  the  general  property  tax  has  become  wholly  inadequate. 
Scarcely  a  tax  commission  or  writer  of  repute  on  tax  matters 
within  the  last  quarter  century  has  discussed  the  general  property 
tax  without  condemning  it,  under  present  conditions,  as  wrong 
in  theory  and  pernicious  in  practice. 

It  is  Unsound  in  Theory  Because:  1.  It  assumes  that 
tax-paying  ability  increases  in  exact  proportion  to  the  amount  of 
property  owned;  while  it  is  generally  true,  other  things  being 
equal,  that  a  man's  ability  to  bear  public  burdens  increases  more 
rapidly  than  the  size  of  his  accumulations.  This  principle  is 
recognized  in  the  taxation  of  incomes  by  making  liberal  exemp- 
tions and  by  applying  progressive  rates  to  the  higher  incomes. 
If  taxes  are  to  be  imposed  on  the  basis  of  possessions,  there  is  no 
logical  reason  why  higher  rates  should  not  be  laid  on  large  ac- 
cumulations of  wealth;  though  as  a  matter  of  practice  in  ad- 
ministration small  accumulations  bear  a  heavier  burden  pro- 
portionately than  the  larger  ones. 

2.  The  general  property  tax  assumes  that  all  kinds  of 
property  are  of  the  same  economic  nature.    It  treats  land,  house- 
hold goods,  productive  machinery,  and  securities  as  of  equal 
significance  of  the  owner's  ability  to  support  the  government. 

3.  It  disregards  the  important  fact  that  taxes  do  not  always 
stay  where  they  are  imposed;    that  in  many  cases  they  are 
"shifted"  from  person  to  person  in  a  most  uncertain  way.    Just 
as  the  customs  and  excise  duties  collected  by  the  federal  govern- 
ment are  shifted  to  the  consumer  through  an  increase  in  price,  so 
property  taxes  on  merchandise  and  the  machinery  of  produc- 
tion or  on  the  privilege  of  carrying  on  business,  where  they  are 
uniform  and  universal,  are  shifted  to  the  consumer.    The  taxa- 
tion of  the  merchant  or  the  manufacturer,  therefore,  under  the 
conditions  named,  becomes  essentially  a  convenient  method  of 
collecting  "at  the  source/'  taxes  on  the  users  of  commodities  in 
proportion  to  the  amount  they  consume.    A  tax  on  the  value 
of  land,  on  the  other  hand,  stays  where  it  is  placed.    It  cannot 
be  shifted  to  the  renter;  it  cannot  be  shifted  to  the  consumer  of 
the  products;  for  the  tax  does  not  affect  the  cost  of  production 
in  such  a  way  as  to  cause  the  price  of  the  product  to  rise.    The 
owner  of  the  land  must  pay  the  tax.    He  cannot  shift  it  to  others. 


General  Property  Tax  Vicious  in  Practice  41 

From  another  point  of  view,  however,  the  owner  of  land  is  in  a 
favored  position:  The  taxes  imposed  on  the  land  when  he  bought 
it  is  no  burden  whatever  to  him;  for  the  price  he  paid  was  less 
than  he  would  have  paid  but  for  the  tax,  by  an  amount  equal  to 
the  tax  capitalized  at  the  current  rate  of  interest.  The  land- 
owner must  bear  the  burden  of  taxes  laid  while  he  owns  the 
land,  but  previous  owners  cannot  pass  their  burden  on  to  him 
and  he  cannot  pass  new  burdens  on  to  future  purchasers.  This 
truth  is  sometimes  expressed  by  saying  that  the  "  selling  value 
of  land  is  an  untaxed  value."  Of  course,  this  principle  applies 
to  other  forms  of  property  yielding  a  permanent  income  as,  for 
example,  a  ninety-nine  year  bond.  To  sum  up :  A  tax  on  merchan- 
dise tends  to  increase  its  price;  a  tax  on  the  value  of  land  or  other 
permanent  source  of  income  lowers  its  price. 

4.  It  assumes  a  constant  ratio  between  the  value  of  the 
property  in  a  concern  and  its  earning  capacity.    The  falseness  of 
this  assumption  is  clearly  seen  in  such  monopolistic  undertakings 
as  the  express  business  where  the  value  of  the  property  employed 
is  no  index  of  income.     But  in  competitive  businesses,  wide 
differences  exist  between  the  value  of  the  property  used  and  the 
income  derived.     The  recognition  of  this  fact  has  led  taxing 
authorities  to  seek  ways  of  reaching  the  "intangible"  or  "fran- 
chise" value  connected  with  prosperous  businesses,  not  shown 
in  the  value  of  the  tangible  property.     Again  there  are  large 
classes  of  persons  in  the  professions  and  in  business,  who  employ 
relatively  little  capital  while  enjoying  comfortable  incomes,  and 
under  our  present  system  escape  their  just  share  of  the  tax  burden. 

5.  The  general  property  tax  assumes  that  securities  repre- 
senting investment  in  industry  are  "property"  in  the  same  sense 
that  lands  and  factories  are.    Some  of  the  most  perplexing  prob- 
lems in  taxation  have  grown  out  of  this  assumption.    If  a  property 
worth  $5,000  is  mortgaged  for  $3,000  it  is  assumed  that  the 
assessable  wealth  of  the  community  has  been  increased  to  $8,000. 
In  such  cases  or  where  under  a  corporate  organization  shares 
of  stock  are  issued,  the  tax  paying  ability  of  the  parties  con- 
cerned is  not  increased  as  is  assumed  when  we  treat  mortgages 
and  stocks  as  "property"  in  an  economic  sense. 

The  General  Property  Tax  is  Vicious  in  Practice.— In 
practice  the  operation  of  the  general  property  tax  is  vicious. 
The  literature  of  taxation  abounds  in  illustrations  of  the  evils  of 


42  Report  of  Nebraska  Tax  Commission 

that  system.  Every  observant  person  is  aware  of  them.  These 
evils  result  mainly  from  the  attempt  to  raise  practically  all  public 
revenue  by  means  of  ad  valorem  taxes,  and  especially  from  the 
attempt  to  impose  the  same  rate  upon  all  classes  of  property. 
When  the  tax  burden  rests  on  a  single  base,  like  that  of  the  value 
of  property,  the  administrative  machinery  is  put  to  a  severer 
and  severer  test  as  the  burden  increases.  As  the  levies  increase 
there  is  new  need  of  full  and  accurate  assessment.  One  prolific 
reason  for  complaint  in  this  state  is  that  improvements  in  methods 
of  assessment  have  not  kept  pace  with  the  growing  need  for 
accuracy.  Many  of  the  evils  of  the  system  may  easily  be  remedied 
as  experience  has  shown,  by  perfecting  the  machinery  of  taxation. 
This  we  shall  discuss  more  particularly  in  connection  with  the 
real  estate  taxes  and  with  proposals  for  administrative  changes. 
Some  evils,  however,  are  due  to  inherent  defects  in  the  system, 
which  no  administrative  device  is  likely  to  overcome.  They 
show  themselves  chiefly  in  dealing  with  those  forms  of  personal 
property  which  by  reason  of  their  easy  concealment  are  called 
"intangibles,"  such  as  securities,  money,  and  credits.  To  the 
consideration  of  the  problems  involved  in  this  part  of  the  general 
property  tax  we  now  turn. 

II.      THE  TAXATION  OF  INTANGIBLE  PROPERTY 

The  testimony  in  every  state  where  the  attempt  is  made  to 
tax  intangible  property  at  the  rates  imposed  on  other  property 
shows  that  the  law  fails.  It  fails  in  two  ways:  It  fails  to  secure 
more  than  a  small  fraction  of  the  revenue  designed  to  be  secured, 
and  it  fails  to  distribute  equitably  the  burden  of  such  taxes. 

The  failure  to  uncover  intangibles  for  purposes  of  taxation 
is  not  confined  to  states  where  there  is  a  lax  administration  of  the 
tax  laws.  In  Massachusetts  where  the  sense  of  respect  for  law 
is  probably  as  strong,  and  the  administration  of  the  law  is  as 
efficient  as  anywhere  in  the  Union,  the  special  commission  of 
1908  estimated  that  not  above  10  per  cent  of  the  taxable  intang- 
ible property  was  placed  on  the  assessment  roll.  The  Tax  Com- 
mission of  Minnesota  a  few  years  ago  estimated  that  about  that 
proportion  of  intangibles  was  found  by  the  assessors  in  that 
state.  Similar  estimates  have  been  made  elsewhere.  Certainly 
a  tax  which  produces  only  one-tenth  of  the  revenue  it  was  designed 
to  produce  may  properly  be  called  a  failure. 


Taxation  of  Intangible  Property  43 

Consequences  more  serious  than  the  loss  of  revenue  follow 
such  a  failure.  Even  where  the  tax  succeeds  under  such  condi- 
tions in  securing  a  limited  revenue  it  fails  from  the  point  of  view 
of  justice,  for  where  so  large  a  volume  of  a  given  kind  of  property 
escapes  taxation,  the  rate  of  return  on  investments  in  it  is  fixed 
on  the  basis  of  practical  exemption.  Only  those  of  tender  con- 
science or  those  unacquainted  with  the  various  devices  for  con- 
cealment pay  the  tax;  and  those  who  pay  have  the  price  of  their 
property  and  the  income  from  it  fixed  by  the  practice  of  those 
who  do  not  pay  the  tax.  A  committee  of  the  National  Tax 
Association  reporting  in  1910  upon  the  reasons  for  the  failure  of 
the  general  property  tax,  in  discussing  this  phase  of  the  subject 
well  said: 

"The  investor  in  securities  usually  pays  a  purchase  price 
which  is  fixed  in  a  country- wide  market,  and  is  calculated  on  the 
assumption  that  the  investment  will  escape  taxation,  and  that  the 
whole  income  will  therefore  be  net.  Where  by  spasmodic  en- 
forcement of  the  law,  or  disclosure  of  personalty  in  a  probate 
court,  securities  that  bear  say  4  per  cent  interest  are  made  subject 
to  a  tax  of  2  or  3  per  cent  on  their  market  or  face  value,  the  moral 
sense  revolts  at  this  practical  confiscation  of  so  large  a  share  of 
the  income." 

It  is  little  wonder  that  under  such  conditions,  tax  payers, 
smarting  under  a  sense  of  injustice,  evade  the  tax  wherever  pos- 
sible, or  that  the  assessor  makes  the  evasion  easy,  as  he  often 
does.  Everybody  who  has  given  the  matter  serious  consideration 
is  aware  of  the  demoralizing  effect  of  a  law  which  drives  right- 
minded  citizens  to  ignore  it  so  generally  that  its  voluntary  obser- 
vance has  come  to  be  looked  upon  as  an  amiable  eccentricity, 
and  leads  tax  officials  to  wink  at  evasion.  What  is  the  practical 
way  out  of  such  a  situation? 

There  are  three  courses  that  may  be  pursued  with  respect  to 
intangibles : 

1.  Strengthen  the  administration  of  the  law  with  a  view 
to  compelling  disclosures. 

2.  Exempt  such  property  from  taxation;  and 

3.  Classify  personal  property,  placing  intangibles  in  a  class 
by  themselves  and  subject  them  to  a  lower  rate  than  is  imposed 
on  other  property. 

We  shall  consider  each  of  these  plans  in  turn. 


44  Report  of  Nebraska  Tax  Commission 

I.      STRENGTHENING  THE  ADMINISTRATION 

Those  who  argue  in  favor  of  strengthening  the  administra- 
tion of  the  tax  laws  usually  have  in  mind  finding  some  way  of 
compelling  the  listing  of  intangibles.  The  suggestions  most 
frequently  made  before  the  tax  commission  for  improving  the 
revenue  system  have  been  in  this  direction:  Empower  the 
assessor  to  examine  the  books  of  banks  with  a  view  to  reaching 
deposits,  it  is  urged;  or  require  notes  and  mortgages  to  be  stamped 
"tax-paid"  in  order  to  render  them  collectible;  or  authorize 
the  employment  of  "tax  ferrets"  to  uncover  money  and  credits. 
Bound  down  as  the  legislature  is  by  the  present  constitution  in 
matters  of  taxation,  it  is  not  strange  that  hardly  a  session  passes 
but  bills  looking  in  this  direction  are  up  for  consideration.  And 
yet  no  truth  has  been  more  firmly  established  by  experience 
everywhere  than  that  such  devices  in  the  end  fail  of  their  pur- 
pose. To  be  sure  by  means  of  them  a  temporary  show  of  success 
might  be  made;  a  certain  number  of  tax-dodgers  might  be 
"caught"  and  an  increase  of  revenue  secured.  Everybody 
could  see  this.  But  not  everybody  would  have  the  patience  to 
watch  the  continued  operation  of  such  laws,  to  follow  the  sub- 
terranean methods  by  which  business  transactions  would  be 
carried  on  by  the  informed,  ownership  concealed,  investment 
shifted  or  interest  rates  raised,  and  in  the  end  the  law  brought  to 
naught. 

The  best  illustration  of  the  operation  of  stringent  legislation 
for  reaching  intangibles  is  found  in  Ohio.  That  state  has  long 
had  much  the  same  stringent  provisions  with  regard  to  declara- 
tion, oath,  penalties,  etc.,  which  were  made  part  of  our  act  of 
1903;  and  in  addition  since  1881  it  has  had,  until  recently,  a  tax 
ferret  law  which  gave  authority  to  the  county  commissioners  in 
any  county  (since  1888)  to  contract  with  such  parties  as  might 
give  information  leading  to  the  placing  of  personal  property  on 
the  tax  rolls.  The  incentive  to  these  so-called  "inquisitors," 
was  a  share — twenty  or  twenty-five  per  cent  of  the  taxes  on  the 
property  uncovered,  for  doing  what  it  was  the  duty  of  the  regular 
tax  officials  to  do.  Many  spectacular  disclosures  were  made  and 
many  who  were  not  attacked  by  the  inquisitors  no  doubt  listed 
property  which,  but  for  the  system,  they  would  not  have  listed. 
During  the  four  years  1893  to  1896,  for  example,  an  average  of 


Strengthening  the  Administration 


45 


about  $20,000,000  was  added  to  the  rolls  by  inquisitors.  And  yet 
the  law  as  an  effective  means  of  securing  the  listing  of  money  and 
credits  proved  clearly  a  failure.  The  following  table  covering  a 
period  when  there  must  have  been  a  great  growth  in  these  forms 
of  property,  shows  in  millions  of  dollars  the  amount  of  money, 
credits  and  stocks  and  bonds  listed  for  taxation : 


Year 

Value  of  All 
Money 
in  Possession 
or  on  Deposit 

Value  of  Credits 
After 
Deducting  All 
Bona  Fide  Debts 

All  Moneys  In- 
vested in  Bonds, 
Stocks  and  Joint 
Stock  Companies 
or  Otherwise 

1881 

$40,600,000 

$101,100,000 

$8,600,000 

1885 

34,300,000 

107,600,000 

8,500,000 

1890       

36,400,000 

111,400,000 

8,000,000 

1895  
1900 

36,900,000 
47,600,000 

106,400,000 
86,900,000 

7,800,000 
8,700,000 

1906  

59,900,000 

77,200,000 

10,800,000 

These  figures  indicate  that  but  a  fraction  of  these  forms  of 
property  was  secured  under  what  has  been  regarded  as  an  ex- 
tremely severe  law.  The  facts  disclosed,  and  a  knowledge  of  the 
unequal  operation  of  the  tax  led  the  Ohio  special  tax  commission 
of  1908  to  the  following  conclusion : 

"The  widespread  concealment  of  intangible  property,  in- 
creasing in  amount  year  by  year,  is  the  most  convincing  proof  of 
the  failure  of  the  general  property  tax.  It  shows  that  after  more 
than  fifty  years  of  experience,  with  all  conceivable  methods  in 
the  way  of  inquisitor  laws,  severe  penalties,  and  criminal  statutes, 
designed  to  force  the  owners  of  moneys  and  credits,  stocks  and 
bonds,  to  put  their  holdings  upon  the  tax  duplicate,  not  only  is  the 
percentage  of  such  property  less  than  ever  before,  but  public 
sentiment  seems  to  be  more  and  more  openly  approving  an  evasion 
of  the  law.  Such  a  condition  of  affairs  is  so  manifestly  wrong  and 
so  inimical  to  good  government  that  its  longer  continuance  is  a 
grave  injury  to  the  state." 

The  experience  of  Iowa  with  the  ferret  system  has  been 
shorter,  but  much  the  same  as  that  of  Ohio.  It  has  been  aban- 
doned in  both  these  states  and  will  probably  never  be  restored. 
Ohio,  however,  has  not  abandoned  its  purpose  of  compelling  the 
listing  of  money  and  credits.  In  its  annual  report  for  1912,  the 
Ohio  Tax  Commission  recommended  a  system  of  highly  cen- 
tralized control  of  assessment  as  a  new  line  of  approach  to  this 
and  other  problems  in  the  valuation  of  property.  These  recom- 
mendations were  adopted  by  the  legislature  of  1913  in  the  §Q-» 


46  Report  of  Nebraska  Tax  Commission 

called  Warnes  Law,  to  be  discussed  in  another  connection  (p.OO). 
It  may  here  be  said,  however,  that  the  Tax  Commission  has 
estimated  that  the  assessment  of  1914  "will  result  in  an  increase 
of  approximately  two-thirds  of  a  billion  dollars  in  the  valuation 
principally  on  intangible  personal  property."  "Whatever  may 
be  the  permanent  outcome  of  the  effort  to  reach  this  most  trouble 
some  class  of  personal  property,  there  can  be  no  doubt  of  the 
superiority  of  Ohio's  present  plan  over  the  old  ferret  system. 

II.      THE  EXEMPTION  OF  INTANGIBLES 

The  argument  for  the  exemption  of  intangibles  proceeds 
along  two  lines,  the  practical  and  the  theoretical.  The  failure 
thus  far  to  devise  any  means  of  uncovering  such  property  fairly 
and  adequately  without  serious  derangement  of  business,  it  is 
claimed  is  sufficient  reason  for  giving  up  the  attempt.  But  it  is 
argued  that  the  chief  reason  why  evasion  is  so  general  with 
respect  to  these  forms  of  property  is  that  to  tax  them  in  any 
manner  is  a  rank  injustice.  If  a  full  assessment  of  all  such  property 
were  made  the  rate  of  return  on  the  investment  would  rise  for 
all  and  one  source  of  inequality  would  be  removed.  But  even 
then  *  corporate  property  and  encumbered  property  would  be 
required  to  bear  a  double  burden  of  taxation.  The  creation  of 
a  corporation,  e.  g.  for  carrying  on  an  enterprise  does  not  create 
any  legitimate  source  of  public  revenue.  It  may  be  a  great 
convenience  to  "incorporate"  ih  order  to  build  a  $10,000  co-opera- 
tive elevator,  but  the  division  of  the  property  into  shares  of  $100 
each  and  the  issue  of  certificates  of  ownership  therefor  adds  noth- 
ing to  the  wealth  of  the  community  or  of  the  owners  of  the  prop- 
erty. The  owners  of  the  elevator  and  of  the  stock  are  the  same 
persons.  If  their  assessment  is  to  be  doubled  as  it  is  where  both 
the  property  and  the  capital  stock  are  listed  for  taxation,  a  dis- 
proportionate burden  is  placed  upon  the  owners  of  corporate 
property.  Here  is  a  clear  case  of  "double  taxation." 

This  fact  is  recognized  in  some  states  which  by  law  exempt 
shares  in  domestic  corporations.  Where  the  law  does  not  specif- 
ically exempt  such  shares,  the  courts  by  judicial  interpretation, 
or  the  assessors  by  administrative  construction  usually  do. 
The  Nebraska  law  (Sections  6313  and  6314  R.  S.  1913)  seems 
to  require  the  taxation  of  shares  in  the  hands  of  the  stockholder 
unless  the  same  have  been  "listed  and  taxed"  in  the  principal 


Exemption  of  Intangibles  47 

place  of  business  of  the  corporation.  The  practice,  however,  is  to 
treat  shares  of  domestic  corporations  as  exempt  in  the  hands 
of  the  holder. 

In  the  case  of  shares  in  foreign  corporations,  the  most  com- 
mon, though  not  universal,  practice  in  the  states  is  to  assess 
them  as  personal  property  at  the  domicile  of  the  owner.  This 
is  the  law  in  Nebraska,  and  the  practice  where  they  can  be  founo^. 
In  1912  the  assessors  listed  $2,719,700  of  stocks  and  shares. 
Of  this,  $789,585  were  returned  under  the  head  of  "all  shares 
of  stock  in  any  corporation  formed  outside  the  state;  also  all 
shares  of  stock  in  any  corporation  formed  in  state  conducting 
business  outside  state";  and  $1,930,175  under  the  head  of 
"stock  in  any  company  or  corporation,  use  special  schedule  for 
Nebraska  companies."  The  assessed  value  was  one-fifth  of 
these  sums.  No  doubt  the  practice  varies  as  to  what  is  included 
under  these  headings— but  in  the  main  it  is  as  stated  above. 
Here  is  one  of  the  anomalies  in  American  taxation,  growing  out 
of  the  divided  jursidiction  involved  in  our  federal  system.  If 
justice  requires  the  exemption  of  securities  representing  invest- 
ment in  home  companies,  it  likewise  requires  the  exemption  of 
securities  of  foreign  companies.  There  is  no  economic  distinction 
between  the  two. 

The  same  reasoning  applies  to  credits.  A  boy  buys  a  team 
to  start  farming  and  gives  his  note  for  the  whole  amount.  The 
horses  have  been  assessed,  say  at  $500,  and  continue  to  be. 
The  note  is  now  assessable  also  for  $500,  though  no  new  wealth 
has  been  created.  No  new  source  of  social  income  exists.  The 
note  is  "property"  in  the  sense  that  it  represents  a  claim  upon 
income  and  has  a  sale  value.  But  it  must  always  be  remembered 
that  the  income  of  the  owner  of  the  team  and  that  of  the  holder 
of  the  note  must  come  from  the  same  single  source,  the  team  of 
horses,  which  before  the  sale  was  "taxed"  but  once.  The  same 
is  of  course  true  of  notes  secured  by  mortgage.  The  legislature 
in  1911  recognized  this  fact  and  enacted  a  law — not  to  exempt 
mortgages,  but  "for  the  taxation  of  mortgages  of  real  property 
and  to  prevent  double  taxation  on  encumbered  property  in  the 
state."  We  have  discussed  this  law  elsewhere.  In  operation,  it 
results  in  the  practical  exemption  of  mortgages  on  real  estate 
in  Nebraska.  But  chattels  and  foreign  mortgages  of  all  kinds 
remain  assessable  in  the  hands  of  the  owner.  Yet  the  only 


48  Report  of  Nebraska  Tax  Commission 

difference  between  a  Nebraska  mortgage  and  a  foreign  mortgage 
is  in  the  location  of  the  security.  The  owner  of  a  foreign  mortgage 
or  of  stock  in  a  foreign  corporation  feels  it  unjust  to  have  the 
same  source  of  his  income  counted  twice  for  taxation,  even 
though  by  different  states.  If  one  is  to  be  double-taxed,  it  is  a 
matter  of  indifference  to  him  whether  he  is  despoiled  by  one  tax- 
ing authority  or  by  two. 

And  thus  it  is  argued  that  the  only  just  method  of  dealing 
with  money,  credits  and  securities  is  to  exempt  them  altogether. 
Whatever  may  be  the  merits  of  this  contention,  this  important 
fact  remains  and  must  be  considered  in  devising  a  revenue 
measure:  A  strong  and  persistent  public  sentiment  is  opposed  to 
the  socalled  exemption  of  citizens  of  large  means  who  draw  their 
income  from  investments  in  other  jurisdictions.  The  thing  that 
still  appeals  with  convincing  force  is  that  such  persons  benefit  by 
the  government  under  which  they  live,  are  able  to  support  it, 
and  should  be  compelled  to  do  so.  As  long  as  this  is  the  judgment 
or  temper  of  the  great  majority  of  citizens,  it  is  perhaps  wise  to 
continue  the  policy  of  taxing  owners  of  money,  credits  and  se- 
curities as  such.  We  do  not  believe,  however,  that  the  intolerable 
inequalities  that  now  exist  and  the  demoralization  which  results 
from  wholesale  evasion  by  taxpayers,  and  widespread  collusion  on 
the  part  of  assessors  can  be  materially  changed  as  long  as  we 
attempt  to  apply  the  general  property  rate  to  these  forms  of 
property.  This  means  that  as  long  as  the  present  constitutional 
restrictions  remain,  there  is  little  hope  of  improving  this  part 
of  the  revenue  system.  If  the  pending  amendment  is  adopted, 
two  paths  lie  open  for  effectively  reaching  the  owners  of  in- 
tangible property:  (1)  Through  the  income  tax;  and  (2)  through 
the  classified  property  tax.  The  first  of  these  methods  of  reform 
we  reserve  for  discussion  in  a  later  chapter;  to  the  second  we  now 
turn. 

III.      THE  CLASSIFIED  PROPERTY  TAX 

The  most  fruitful  experience  during  recent  years  in  dealing 
with  intangibles  has  been  in  the  direction  of  classifying  property 
according  to  its  economic  character  and  subjecting  each  class  to 
a  suitable  rate.  Classification  thus  far  has  consisted  chiefly  in 
making  a  separate  class  for  money  and  credits  and  taxing  them 
at  a  lower  rate  than  general  property;  but  the  principle  may, 


The  Registry  Tax  49 

and  doubtless  will,  be  carried  much  further.  The  criticisms 
against  taxation  by  valuation  are  largely  removed  by  such 
classification.  Not  all  experiments  in  this  direction  comirend 
themselves  equally,  but  any  of  them  offer  a  better  mode  of  treat- 
ing intangibles  than  that  of  the  general  property  tax. 

The  Registry  Tax.— First  as  to  the  treatment  of  mortgages. 
New  York  in  1905  lifted  mortgages  secured  by  real  estate  within 
the  commonwealth  from  the  general  property  tax.  They  had 
previously  been  listed  as  personal  property.  The  law  of  1905 
substituted  an  annual  five  mill  tax  uniform  throughout  the 
state.  The  next  year  this  was  changed  to  a  recording  tax  of  the 
same  rate  (50  cents  per  $100)  paid  at  the  time  of  registration. 
Mortgages  upon  which  the  registry  tax  is  paid  are  exempt  from 
future  taxation  within  the  state.  The  net  revenue  is  divided 
equally  between  the  state  treasury  and  the  county  of  registration. 
The  total  amount  of  tax  collected  under  this  law  has  averaged 
somewhat  more  than  three  and  one-half  millions  a  year.  The 
expense  of  collection  has  been  low,  about  one  and  a  half  per  cent 
of  the  tax.  The  following  table  shows  the  gross  income  from 
the  tax: 

1906 $900,000  (estimated) 

1908 3,399,998 

1909 3,755,649 

1911 3,630,092 

1913 3,728,544 

Since  1907  Minnesota  has  had  a  similar  law  which  yields 
a  revenue  of  half  a  million  a  year.  In  1911  New  York  extended 
the  principle  of  the  registry  tax  to  foreign  mortgages  and  other 
"secured  debts,"  to  serial  bonds,  notes  and  debentures  secured 
by  mortgage,  and  to  bonds  of  other  states  and  of  municipalities. 
If  such  property  is  not  presented  for  registration  it  is  subject  to 
taxation  under  the  general  property  tax.  While  such  a  method 
of  taxation  is  perhaps  preferable  to  that  of  taxing  such  property 
under  the  general  property  tax,  it  has  serious  defects.  The  tax, 
if  indeed  it  be  a  tax,  can  be  evaded  by  those  who  do  not  care 
for  the  protection  given  by  registration.  The  supreme  court  of 
Minnesota  has  contrued  the  law  as  imposing  a  tax  on  the  right 
to  record  the  mortgages  and  not  on  the  debt  secured  by  it.  A 
more  serious  objection  is  that  the  tax  bears  unequally  upon 


50 


Report  of  Nebraska  Tax  Commission 


instruments  running  for  different  terms.  A  mortgage  which 
runs  fifty  years  pays  the  same  tax  as  one  running  for  one  year. 
For  long  term  mortgages,  such  as  are  often  issued  by  corpora- 
tions, the  ta*  is  so  light  as  to  give  practical  exemption. 

The  Annual  Flat  Rate  Tax. — This  objection  is  avoided  by 
the  method  employed  in  several  states  of  imposing  a  low  annual 
tax,  uniform  throughout  the  state,  upon  certain  forms  of  intangible 
property.  This  plan  has  been  followed  in  Pennsylvania  for  many 
years,  and  with  apparent  success.  A  flat  rate  of  four  mills  on 
each  dollar  of  value  of  intangible  property,  uniform  for  the  whole 
state,  is  imposed.  Since  1891  three-fourths  of  this  tax  has  been 
returned  to  the  several  counties,  the  remainder  going  into  the 
state  treasury.  Beginning  with  1914  all  the  tax  from  this  source 
is  to  go  into  the  local  treasuries. 

The  striking  growth  of  these  forms  of  property  is  disclosed  in 
the  following  table  supplied  by  the  state  treasurer: 


1907 1,014,757,783 

1908 1,104,513,428 

1909 1,141,899,627 

1910 1,184,398,749 

1911 1,198,861,401 

1912 1,266,095,982 

1913 1,402,511,272 


1885 $159,304,729 

1888 429,751,583 

1891   575,295,999 

1894   613,927,285 

1897 673,669,421 

1900 722,864,569 

1903 882,310,195 

1906 932,688,853 

These  figures  probably  do  not  represent  the  full  amount  of 
this  kind  of  property  owned  in  the  state,  but  they  are  in  striking 
contrast  to  the  figures  quoted  above  for  Ohio  showing  a  con- 
tinuous decrease  in  such  property. 

Minnesota's  Experience. — Minnesota  in  1911  enacted  a 
similar  law.  The  statute  provides  for  the  separate  listing  of 
money  in  hand  or  on  deposit,  promissory  notes  and  bonds  other 
than  mortgages  on  Minnesota  real  estate,  municipal  bonds,  book 
accounts,  annuities,  royalties  and  all  claims  and  demands  for 
money  or  other  things  of  value.  The  law  does  not  apply  to  money 
and  credits  belonging  to  incorporated  banks,  to  shares  of  stock, 
to  mortgages  secured  within  the  state,  the  latter  continuing 
subject  to  the  registry  tax,  nor  to  municipal  bonds  which  are 
exempt.  The  return  of  moneys  and  credits  is  made  on  a  separate 
schedule,  and  it  is  specifically  required  that  the  taxpayer  make 


Minnesota's  Experience  51 

oath  as  to  the  correctness  of  his  return.  The  tax  is  paid  into  the 
county  treasury  as  other  property  taxes,  but  is  apportioned  as 
follows:  One-sixth  to  the  revenue  fund  of  the  state;  one-sixth  to 
the  county  revenue  fund;  one-third  to  the  city,  village  or  town; 
and  one-third  to  the  school  district  in  which  the  property  is 
assessed.  Under  the  old  law,  deductions  for  debt  were  allowed 
as  an  offset  to  credits.  Under  the  present  law,  no  deductions  are 
allowed. 

The  results  of  the  three  mill  law  are  seen  in  the  following 
table: 

Per  Cent 

Number  Total  Per  Capita   Increase 

Year  Assessed  Assessment  Assessment  Over  1910 

1910. 6.200  $13,919,806  $6.70 

1911 41,439  115,481,807  55.63  730 

1912 50,564  135,369,314  65.22  873 

1913 57,068  156,969,892  1,027 

1914 73,007  196,173,719  1,309 

An  interesting  episode  of  the  1911  assessment  shows  the 
advantage  of  having  a  centralized  control  over  the  taxing  mach- 
inery. This  was  the  first  assessment  under  the  new  law.  It  was 
begun  only  a  few  days  after  the  law  becam.e  effective  and  partly 
for  this  reason  and  partly  no  doubt  because  of  lax  habits  of  the 
assessors,  many  districts  made  lower  returns  than  were  expected. 
This  led  to  a  re-assessment  in  two  hundred  and  ninety-seven 
taxing  districts  out  of  a  total  of  twenty-four  hundred,  by  special 
assessors  appointed  by  the  State  Tax  Commission.  The  results 
were  significant.  In  these  297  districts,  the  regular  assessors 
listed  only  1831  persons  having  money  and  credits  amounting  to 
$4,602,296,  "while  the  special  assessors  found  8,630  persons 
subject  to  the  tax  for  a  total  assessment  of  $14,221,949,  a  gain 
of  $9,618,653,  the  increase  in  the  number  of  persons  assessed 
being  370  per  cent  and  210  per  cent  in  the  amount  of  the  assess- 
ment^ 

We  quote  the  Tax  Commission  on  one  phase  of  the  law: 
"Some  criticism  of  the  law  is  heard  because  it  does  not  permit 
of  the  deduction  of  debts  from  credits.  It  should  be  remembered 
however,  that  a  person  who  owes  a  debt  upon  his  farm  or  his 
home,  or  on  his  farm  implements  or  household  goods,  or  merchan- 
dise, is  not  permitted  to  deduct  such  debt  from  the  assessed 


&i  Report  of  Nebraska  Tax  Commission 

V&lue  of  his  property*  There  is  perhaps  as  much  justification  on 
grounds  of  equity  for  deducting  debts  from  these  classes  of  prop- 
erty as  from  credits,  but  iio  guch  deductions  have  ever  been  per- 
mitted under  the  law.  In  the  opinion  holding  that  debts  cannot 
be  deducted  from  credits  the  supreme  court  gays: 

"Though  this  result  leads  to  a  departure  from  the  long  settled 
policy  of  the  state  to  allow  the  deduction  of  debts  in  taxation  of 
this  kind,  that  policy  was  at  its  inception  of  doubtful  merit,  in 
that  it  extended  to  one  class  of  tax  payers  a  favor  not  granted  to 
others.  It  permitted  the  tax  payer  holding  credits  to  deduct  his 
debts  from  the  amount  of  his  assessment,  and  denied  the  right 
to  any  owner  of  other  property  who  was  also  in  debt." 

The  Tax  Commission  in  its  report  for  1912  concludes  its  dis- 
cussion of  the  operation  of  the  law  as  follows : 

"While  it  is  not  claimed  that  all  intangible  property  subject  to 
taxation  under  the  new  law  has  been  placed  on  the  assessment 
rolls,  the  proportion  that  now  escapes  taxation  is  much  less  than 
it  was  when  we  attempted  to  tax  such  property  with  the  same 
machinery  and  on  the  same  basis  as  other  forms  of  property. 
In  addition,  it  will  not  be  denied  that  the  tax  burden  on  this  class 
of  property  is  much  more  widely,  as  well  as  much  more  equitably 
and  justly  distributed  than  it  was  under  the  old  system. 

While  it  can  scarcely  be  claimed  that  two  years  afford 
sufficient  time  to  demonstrate  the  success  or  failure  of  any 
radical  departure  from  methods  of  taxation  that  have  grown 
hoary  with  age,  yet  our  brief  experience  in  Minnesota  with  the 
three  mill  tax  on  money  and  credits  justifies  us  in  the  belief  that 
we  have  taken  a  decided  step  in  advance.  Men  differ  as  to  the 
wisdom  of  taxing  property  of  this  nature  at  all,  but  there  is  no 
difference  in  opinion  that  a  burdensome  or  confiscatory  tax  drives 
such  property  into  concealment.  Experience  in  our  own  and 
every  other  state  has  demonstrated  that  when  a  tax  rate  con- 
sumes more  than  10  per  cent  of  the  income  from  this  class  of 
property  it  will  not  be  voluntarily  listed  for  taxation.  The  aver- 
age tax  rate  in  Minnesota  this  year  is  nearly  30  mills.  With  such 
a  rate  consuming,  as  it  would,  from  40  to  60  per  cent  of  the  in- 
come from,  invested  credits,  it  would  be  folly  to  hope  to  reach  more 
than  a  fraction  of  such  property  for  purposes  of  taxation  under 
the  old  system. 

It  was  for  this  reason  that  the  legislature  passed  the  three 
mill  tax  law.  We  believe  it  is  a  decided  improvement  over  the 
old  method  of  taxing  money  and  credits,  because  it  is  more 
equitable  and  will  eventually  produce  more  revenue  than  the 
old  system  did.  Above  all,  it  makes  for  good  citizenship,  because 
it  reduces  the  premium  on  dishonesty,  and  permits  men  to  be 


Experience  in  Other  States  53 

truthful  in  their  tax  statements  without  the  fear  of  having  their 
property  confiscated  in  excessive  tax  rates." 

Experience  in  Other  States. — Maryland  has  had  equal 
success  in  bringing  out  intangibles  at  a  low  rate.  Rhode  Island 
has  since  1912  had  a  flat  four  mill  tax  on  money  and  credits. 
The  operation  of  the  law  there  can  not  be  understood  without 
considering  the  method  of  reaching  the  "intangible  value"  of 
corporations.  It  appears  probable  that  there  has  not  been  a  gain 
in  valuation  sufficient  to  make  up  the  loss  of  revenue  at  the  low 
rate,  if  the  returns  of  individual  taxpayers  alone  be  considered. 
But  mercantile  and  manufacturing  corporations  are  taxed  on 
their  "corporate  excess"  and  their  money  and  credits  as  such  do 
not  appear  in  the  tax  rolls.  Public  service  corporations  are  taxed 
on  their  gross  receipts.  Taking  these  facts  into  account,  the  Tax 
Commission  says  in  its  report  of  January,  1914: 

"The  local  valuation  of  intangibles,  together  with  savings 
and  participation  accounts  and  reserve  funds,  the  corporate 
excess  of  manufacturing,  mercantile,  and  miscellaneous  corpora- 
tions, the  stock  of  banks  and  trust  companies,  and  the  securities 
of  public  service  corporations  obtained  by  capitalizing  their 
gross  receipts  tax  on  a  basis  of  $4  per  $1,000.00,  gives  the  total 
amount  of  intangibles  paying  taxes  in  this  state  as  more  than 
$460,000,000.00,  an  amount  which  was  never  even  approached  be- 
fore the  enactment  of  the  Tax  Act  of  1912,  and  which  exceeds  the 
total  local  valuation  of  the  state  for  1904  by  more  than  $16,000,000. 
Not  only  has  the  amount  of  intangibles  greatly  increased,  but 
also  the  amount  of  taxes  paid,  notwithstanding  the  flat  rate  of 
$4  per  $1,000.00.  The  net  increase  in  total  revenue  paid  on 
account  of  intangibles,  while  not  positively  determinable,  is  not 
less  than  three-quarters  of  a  million  dollars,  and  is  in  all  proba- 
bility much  more." 

In  Iowa  alone  of  the  states  that  have  adopted  the  classified 
tax  for  intangibles  has  there  been  a  failure  to  secure  additional 
revenue.  In  that  state  there  has  been  an  actual  loss  of  revenue 
to  the  public  treasuries  estimated  at  $1,000,000  a  year.  The 
failure  of  the  Iowa  law  to  bring  out  an  increased  amount  of  mcrey 
and  credits  is  explained  by  the  Special  Tax  Commission  of  1912 
by  the  absence  of  any  centralized  supervision  and  control  such 
as  exists  in  Minnesota  and  Rhode  Island. 

The  Situation  in  Nebraska. — As  pointed  out  in  a  previous 
paragraph,  the  law  as  it  now  stands  is  not  clear  with  respect  to 


54  Report  of  Nebraska  Tax  Commission 

• 

the  taxation  of  shares  of  stock  in  corporations.  It  is  also  vague 
with  reference  to  the  taxation  of  credits.  The  law  as  it  stood  prior 
to  the  revision  of  1903  permitted  a  taxpayer  "to  deduct  from 
the  gross  amount  of  credits  the  amount  of  all  bona  fide  debts 
owing  .by  such  person,  company,  or  corporation  to  any  other 
person,  company  or  corporation  for  a  consideration  received." 
The  act  of  1903  made  no  provision  for  deductions,  but  the  su- 
preme court  has  held  in  a  series  of  cases  that  the  word  "credit" 
as  used  in  the  act  means  "net  credit."  To  arrive  at  which  in- 
debtedness may  be  deducted  from  "gross  credits."  The  term 
has  received  further  interpretation  bearing  on  the  question  of 
deductions.  Credits  arising  in  the  course  of  trade  are  held  to 
be  true  credits  within  the  meaning  of  the  statute  and  bona  fide 
debts  may  be  offset  against  them;  while  credits  arising  from  the 
loaning  or  investing  of  money  should  be  treated  as  "money 
loaned"  and  not  as  credits  against  which  debt  may  be  offset. 
State  v.  Fleming,  70  Neb.,  523,  1903;  Lancaster  Ccunty  v. 
McDonald,  73  Neb.,  453,  1905;  Rcyal  Highlanders  v.  State 
77  Neb.,  18;  Oleson  v.  Cuming  Co.,  81  Neb.,  209,  1908. 

So  much  for  the  law  as  now  interpreted.  The  tables  given 
below  show  what  success  the  assessors  have  had  in  listing  this 
class  of  property  prior  to  the  act  of  1903  and  since  that  date. 
The  Grand  Assessment  Roll  from  1880  to  1903  inclusive  had 
fewer  items  than  it  now  carries.  The  intangibles  were  annuities, 
moneys  and  credits  of  banks  and  brokers,  moneys  and  credits 
other  than  of  banks,  bonds,  shares  of  stock,  warrants  and  "fran- 
chises." The  totals  of  these  items,  the  percentage  they  con- 
stituted of  the  total  assessment,  and  of  the  personal  property 
assessment  are  given  in  the  following  table: 


The  Situation  in  Nebraska 


55 


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56  Report  of  Nebraska  Tax  Commission 

As  will  be  seen  less  than  four  millions  of  these  forms  of 
property  were  put  upon  the  rolls  in  1903,  under  a  law  requiring 
property  to  be  listed  at  its  full  value.  In  1904,  the  first  year 
under  the  new  law,  which  provided  for  an  assessment  at  one-fifth 
of  the  "actual  value/'  intangibles  rose  to  more  than  twelve 
millions  and  they  constituted  4.19  per  cent  of  the  whole  assess- 
ment. The  table  which  follows  shows  the  items  of  this  class  of 
property  since  1904,  and  the  percentage  they  constitute  of  the 
total,  and  of  the  personal  property  assessment: 


Valuation  of  Intangible  Property 


57 


TABLE  IX 

Assessed    Valuation    of    Intangible    Property    by    Classes, 

1904-1914 


Year 

Annuities 

Bonds 

Notes 
Secured  by 
Mortgages 

Other 
Notes 

Book 
Accounts 

Money 
on  Hand 
or  Deposit 

Money 
Loaned 

Judg- 
ments 

1904  .  . 

$14,453 

$107,681 

$4,501,215 

$1,912,699 

$701,461 

$3,774,244 

$157,712 

$28,239 

1905.  . 

10,809 

112,852 

4,723,912 

1,929,636 

761,934 

3,666,486 

125,708 

21,790 

1906.  . 

10,196 

101,554 

5,054,812 

2,024,324 

820,381 

4,486,895 

118,010 

18,894 

1907  .  . 

7,273 

169,095 

5,469,745 

2,254,212 

889,790 

5,323,129 

120,188 

27,310 

1908  .  . 

10,675 

153,651 

6,064,995 

2,619,007 

957,591 

4,980,796 

175,334 

33,534 

1909  .  . 

11,602 

186,338 

6,446,660 

2,603,178 

991,991 

5,552,987 

177,144 

29,125 

1910.  . 

26,672 

189,444 

7,249,134 

2,740,356 

1,093,379 

5,813,907 

229,093 

23,427 

1911.  . 

19,014 

270,692 

7,964,167 

2,906,961 

1,023,229 

4,863,940 

219,523 

1,085,314 

1912.. 

12,755 

194,725 

6,397,154 

2,952,652 

975,322 

5,157,418 

185,475 

22,040 

1913  .  . 

21,438 

188,133 

4,769,780 

3,016,514 

1,055,504 

5,025,461 

173,159 

23,873 

.1914.  . 

12,472 

176,220 

3,221,007 

3,091,134 

1,034,319 

4,751,276 

162,122 

22,450 

Year 

MoneyP'd 
Building 
&  Loan 
&  Saving 
Ass'ns 

Stock  in 
Corpora- 
tions 

Stock 
in  Any 
Company 

Fran- 
chises 

Credits 
not 
Otherwise 
Listed 

Totals 

Intang- 
ible Per 
Cent  of 
Total 
Assessm't 

Intang- 
ible Per 
Cent  of 
Personal 
Property 

1904  

$179,340 

$275,078 

$314,075 

$149,992 

$245,226 

$12,361,415 

4.19 

18.50 

1905  

196,013 

140,476 

319,716 

110,875 

187,370 

12,307,577 

4.04 

17.72 

1906  

232,243 

241,157 

212,326 

139,308 

120,505 

13,580,605 

4.34 

18.00 

1907.  

266,541 

233,487 

315,056 

148,060 

137,610 

15,361,496 

4.66 

18.41 

1908  

297,178 

220,042 

587,238 

143,207 

243,423 

16,486,671" 

4.21 

19.90 

1909  ..... 

337,013 

<    96,959 

309,898 

116,695 

368,355 

17,227,945 

4.32 

20.11 

1910  

358,992 

153,610 

528,016 

125,998 

232,303 

18,764,331 

4.55 

19.67 

1911  
1912. 

371,738 
380,556 

123,213 
157,917 

510,480 
386,035 

69,089 
31,499 

253,882 
660,044 

19,681,242 
17,513,592 

4.73 
3.78 

20.95 
19.62 

1913  

409,799 

189,127 

343,034 

35,923 

524,546 

15,776,291 

3.35 

17.10 

1914  

- 

406,978 

171,234 

391,344 

29,585 

537,490 

14,007,631 

2.97 

15.56 

58  Report  of  Nebraska  Tax  Commission 

It  will  be  seen  that  during  the  first  eight  years  of  the  period 
there  was  a  steady  increase  of  this  class  of  property  placed  on  the 
rolls.  The  high  mark  was  reached  in  1911  when  the  assessed 
valuation  stood  at  $19,681,242,  or  4.73  per  cent  of  the  total 
assessed  valuation.  The  decline  since  1911  is  due  chiefly  to  the 
operation  of  the  mortgage  tax  law  enacted  that  year. 

The  problem  before  us  is  how  to  treat  moneys,  securities 
and  these  various  forms  of  credit  for  purposes  of  taxation.  We 
believe  the  best  course  with  respect  to  these  forms  of  property 
is  to  place  them  in  a  special  class  and  subject  them  to  a  low  rate 
uniform  throughout  the  state.  If  the  experience  of  other  states 
is  repeated  in  Nebraska,  the  change  should  result  in  an  increase 
of  revenue.  But  whether  the  revenues  are  increased  or  not  a 
gain  will  be  made  by  removing  one  of  the  strongest  incentives  to 
evasion  with  all  its  vicious  effects,  and  by  doing  substantial 
justice  to  those  who  will  not,  or  cannot,  evade  the  present  law. 
It  is  not,  perhaps,  an  ideal  solution  of  a  difficult  problem,  but 
that  it  is  a  practical  way  out  of  an  intolerable  situation  is  shown 
by  the  experience  of  the  states  where  it  has  been  given  a  serious 
trial. 

Conditions  Necessary  to  Success. — It  is  not  pretended 
that  the  proposed  law  would  be  self-operative.  Many  persons 
would  attempt  to  evade  a  low  rate  just  as  they  now  evade  the 
general  property  tax  rate.  There  is  reason  for  believing,  however, 
that  the  great  majority  of  taxpayers  would  not  do  so  under  a 
reasonably  efficienct  administration  of  the  law.  Taxation  from 
its  very  nature  rests  on  coercion,  and  effective  administration  is 
a  necessary  feature  of  every  revenue  law.  This  suggests  the  first 
condition  to  the  success  of  the  proposed  plan:  That  there  shall 
be  an  efficient  central  control  of  assessments  such  as  can  be 
exercised  only  by  a  tax  commission  with  strong  powers.  If  the 
people  of  the  state  are  not  willing  to  pay  the  price — not  willing 
to  submit  to  state  supervision  and  to  meet  the  expense  involved— 
the  hope  of  materially  improving  the  present  situation  may  as 
well  be  given  up.  A  second  essential  feature  of  the  proposed  plan 
is  that  the  fear  be  removed  that  upon  listing  securities  under  it,  the 
taxpayer  may  be  mulcted  for  back  taxes  for  a  term  of  years.  In 
the  third  place,  taxpayers  must  have  reasonable  assurance  that 
the  plan  is  to  have  a  fair  degree  of  permanence. 


Valuation  of  Intangible  Property  59 

Conclusions  and  Recommendations. — We,  therefore, 
recommend  that  in  case  the  pending  amendment  is  adopted  pro- 
vision be  made  for  taxing  moneys,  credits  and  securities  at  the 
rate  of  three  or  four  mills  on  the  dollar  of  true  value  without 
allowance  of  the  privilege  of  offsetting  debts,  and  that  provision 
be  made  to  prevent  the  information  given  under  this  act  from 
being  used  as  a  means  of  collecting  back  taxes.  If  the  amendment 
fails  of  adoption  this  form  of  property  must  continue  to  be  treated 
in  the  same  way  as  other  property. 


60  Report  of  Nebraska  Tax  Commission 


CHAPTER  IV 
THE  REAL  ESTATE  TAX 

By  far  the  most  important  item  of  property  on  the  assess- 
ment rolls  is  real  estate.  Out  of  a  total  valuation  in  1913  of 
$470,690,414,  real  estate  amounted  to  $322,632,157  or  68.54  per 
cent.  This  kind  of  property  was  classified  as  follows: 

LANDS                            Acres  Assessed  Value  Average 

Improved 21,868,920  $199,342,372  $9.34 

Improvements 21,312,552 

Unimproved 18,334,087  30,589,822  1.66 


Total  lands  and  improve- 
ments  . .  .40,203,007  $251,244,746             6.26 

CITY  AND  VILLAGE  LOTS     Number 

Improved 344,785  27,098,751           81.43 

Improvements 38,046,624 

Unimproved 216,039  6,242,466           43.58 


Total    lots    and    improve- 
ments.. 560,824        $71,387,841       $127.29 


Total  Real  Estate $322,632,187 

These  totals  are  exclusive  of  improvements  on  leased  lands, 
amounting  in  1912  to  $1,398,504;  the  right-of-way  and  terminal 
sites  of  railways  fixed  by  the  Railway  Commission  for  1911,  at 
$30,818,544  (full  value);  lands  owned  by  the  federal,  state  and 
local  governments  and  privately  owned  real  estate  exempt  from 
taxation. 

Provisions  of  the  Present  Law. — Since  1904  real  estate 
has  been  assessed  quadrennially.  A  crude  sort  of  classification 
is  made  of  "improved,"  and  "unimproved,"  lands,  and  "im- 
proved" and  "unimproved"  lots,  and  a  separate  valuation  of 
improvements  is  required.  The  improvements  are,  however, 
taxed  in  exactly  the  same  way  as  the  land  itself.  When  improve- 


The  Real  Estate  Tax  61 

ments  are  made  after  an  assessment,  which  increases  the  sale 
value  by  more  than  $100,  the  assessor,  at  the  time  of  making  the 
annual  personal  property  assessment  following,  is  required  to 
increase  the  original  valuation  by  an  amount  equal  to  "the 
true  value  added  to  such  parcel  of  land  or  lots  by  the  said  im- 
provements." Likewise  deductions  are  allowed  in  case  of  loss 
by  fire  or  flood.  Assessments  are  equalized  by  the  county  board 
and  the  state  board,  as  in  the  case  of  personal  property.  The 
county  board  of  equalization  is  authorized  at  any  of  its  annual 
meetings  to  consider  and  correct  "evident  errors  of  assessment 
or  apparent  gross  injustice  in  over- valuation  or  under- valuation 
of  real  property."  An  amendment  to  Section  121  of  the  Revenue 
Law  made  by  the  legislature  of  1911  seems  to  give  power  to  the 
county  board  to  enter  upon  a  general  equalization  of  real  estate 
in  alternate  years  beginning  with  1912,  without  any  re-assess- 
ment having  been  made. 

Permanent  Character  of  this  Source  of  Revenue. — 
There  is  no  question  as  to  the  propriety  of  the  land  tax  such  as  is 
raised  in  connection  with  personal  property  taxes.  The  land  of  a 
country,  its  primary  source  of  wealth,  has  always  and  everywhere 
been  an  important  source  of  public  revenue  and  everyone  agrees 
that  it  must  continue  to  be.  Indeed  it  has  been  earnestly  urged 
before  this  Commission  that  it  should  be  made  the  sole  source. 
The  advocates  of  the  system  of  taxing  land  values  only  are  not 
primarily  interested  in  fiscal  reform  but  in  a  larger  and  more 
fundamental  reform  of  economic  and  social  conditions.  Whatever 
the  merit  of  such  a  scheme  as  a  plan  of  social  reform  or  as  a  reform 
of  the  revenue  system,  the  real  estate  taxes  will  without  doubt 
continue  to  occupy  in  the  future,  as  in  the  past,  an  important 
place  in  the  fiscal  system.  The  great  practical  problem  in  con- 
nection with  this  class  of  property  is  to  improve  the  method  of 
assessment  to  the  end  that  greater  accuracy  in  the  valuations  may 
be  secured. 

The  Taxation  of  Improvements.— Although  the  law 
requires  the  separate  listing  of  land  and  the  improvements 
thereon,  the  two  elements  of  real  estate  are  subject  to  the  same 
rule  of  assessment  and  taxation.  It  is  a  matter  of  common  ob- 
servation, however,  that  improved  properties  are  assessed  at  a 
larger  percentage  of  their  true  value  than  unimproved  property. 
It  seems  clear  that  if  any  discrimination  is  to  be  made  in  the 


62  Report  of  Nebraska  Tax  Commission 

assessment  it  should  be  in  favor  of  the  improved  property.  It 
has  been  argued  before  the  Commission  that  improvements 
ought  to  be  exempted  from  taxation.  In  recent  years  several 
bills  have  been  introduced  into  the  legislature  looking  to  such 
exemption.  This  is  in  line  with  the  policy  adopted  in  the  western 
provinces  of  Canada  by  many  municipalities,  and  with  a  number 
of  attempts  made  in  American  cities.  Pueblo,  Colorado  at  the 
present  time  is  in  process  of  abolishing  the  taxation  of  im- 
provements. 

If  such  a  policy  were  adopted  it  would  involve  a  reduction 
of  valuation  on  the  grand  assessment  roll  by  $59,359,176  as 
shown  in  the  assessment  of  1913,  though  the  census  bureau  for 
1910  found  the  value  of  buildings  on  farms  alone  was  $198,807,622. 
Unless  new  sources  of  revenue  are  found  the  remaining  property 
would  of  course  have  to  bear  a  heavier  burden.  A  large  part  of 
this  increase  would  fall  upon  the  land  though  other  kinds  of 
property  would  share  the  burden  of  higher  levies.  The  exemp- 
tion would  operate  unequally  as  between  town  and  country. 
Of  the  $59,359,176  of  assessed  value  returned  by  the  assessors  as 
improvements  in  1913,  $21,312,552  was  for  improvements  on 
farms,  and  $38,046,624  for  those  on  lots  in  villages  and  cities. 
One-half  of  the  valuation  of  city  improvements  is  returned  from 
Douglas  ($14,000,000)  and  Lancaster  ($5,000,000)  counties.  The 
relative  importance  of  land  and  improvements  in  town  and 
country  as  shown  by  the  assessed  valuation  of  1913  is  summarized 
in  the  following  table: 

Value  of  lands $229,931.794 

Value  of  improvements  on  land. . .     21,312,552 

Value  of  lots 33,341,217 

Value  of  improvements  on  lots.  . .     38,046,624 

It  has  been  proposed  before  the  Commission  and  in  the 
legislature  to  exempt  improvements  on  farms  while  leaving  city 
improvements  subject  to  taxation.  We  can  see  no  economic 
justification  for  such  a  plan.  But  land  and  improvements  do 
belong  to  two  distinct  economic  classes,  and  may  properly  be 
taxed  upon  a  different  basis.  Land  tends  to  increase  in  value 
and  this  without  effort  on  the  part  of  the  owner,  while  improve- 
ments are  subject  to  constant  depreciation  and  in  the  end  must 
be  replaced  by  labor.  A  tax  on  improvements  tends  to  discourage 


Assessment  of  Real  Estate  63 

the  making  of  them;  a  tax  on  land  has  little  or  no  deterrent  effect 
on  industry.  These  differences  may  not  warrant  the  disturbance 
of  property  values  that  would  be  involved  in  the  total  exemption 
of  improvements.  But  in  our  opinion  they  do  warrant  a  dis- 
crimination in  favor  of  the  less  durable  property.  We,  therefore, 
recommend  that  in  case  the  pending  tax  amendment  is  adopted 
the  law  be  so  amended  that  improvements  shall  be  assessed  at 
75  per  cent  of  the  value  they  add  to  land  and  that  land  shall  be 
assessed  at  its  true  value.  This  would  at  least  correct  the  present 
too  prevalent  practice  of  placing  a  larger  burden  on  improved, 
than  on  unimproved  property. 

The  Assessment  of  Real  Estate. — The  most  important 
problem  connected  with  the  taxation  of  real  estate  is  that  of  im- 
proving the  method  of  assessing  this  important  class  of  property. 
It  is  usually  assumed  that  the  correct  valuation  of  real  estate  is 
a  very  simple  matter,  and  compared  with  the  difficulties  of 
assessing  most  personal  property  it  is  simple.  Nevertheless  it 
is  no  easy  task  if  justice  is  to  be  done.  It  is  a  task  which  demands 
the  exercise  of  skill  and  judgment,  and  this  demand  is  becoming 
more  and  more  imperative  with  the  increase  of  the  tax  burden 
upon  this  species  of  property. 

Unequal  Assessments. — Some  idea  of  the  inequalities 
that  exist  under  present  methods  of  assessment  may  be  gained 
from  the  following  table  compiled  from  the  Sixth  Annual  Report 
of  the  Railway  Commission,  the  United  States  Census,  and  the 
Report  of  the  Auditor  of  Public  Accounts: 


64 


Report  of  Nebraska  Tax  Commission 


Table  Showing  the  "Actual  Value"  of  Land  and  Improve 
ments  as  Found  by  the  Assessors,   1913,  the  Value 
Found  by  the  Railway  Commission,  1913,  and  the 
Census  Value  of  1910 


AVERA< 

3E  VALUE   PEE 

.  ACRE 

Assessors' 

Assessors 
1913 

Railway 
Commission 
1913 

Census 
1910 

of  Railway 
Commission's 
Value 

Adams  

$55.55 

$90.50 

$90.61 

61.38 

Antelope  

32.65 

59.00 

51.35 

55.32 

Banner  

4.20 

11.75 

11.16 

35.74 

Elaine  

4.55 

8.25 

6.05 

55.12 

Boone  
Box  Butte 

43.65 
5.95 

67.25 
15.40 

69.00 
13.49 

64.91 
38.64 

Boyd  

30.00 

40.00 

43.40 

75.00 

Brown  

8.95 

15.00 

14.56 

59.67 

Buffalo  

31.00 

61.50 

57.00 

50.40 

Burt  

79.65 

104.00 

92.31 

76.58 

Butler  

72.40 

104.00 

102.61 

69.61 

Cass  

73.60 

99.80 

103.88 

73.75 

Cedar. 

60.00 

83.25 

75.15 

72.07 

Chase  . 

6.05 

14.00 

15.93 

43.21 

Cherry  

3.45 

7.45 

7.62 

46.31 

Cheyenne.  . 
Clay  
Colfax  

8.35 
72.70 
77.60 

18.25 
96.80 
109.00 

18.41 
96.05 
109.75 

45.75 
75.11 
71.19 

Cuming  
Custer  
Dakota  
Dawes  
Dawson  

77.30 
13.75 
60.75 
4.80 
30.05 

113.00 
31.90 
85.75 
14.10 
50.00 

106.83 
28.88 
78.85 
14.50 
50.94 

68.40 
43.10 
70.85 
34.04 
60.10 

Deuel  

8.20 

24.00 

26.87 

34.16 

Dixon  

50.85 

79.00 

77.20 

64.36 

Dodge 

82.10 

109.00 

103.48 

75.32 

Douglas 

93.75 

138.50 

131.99 

67.69 

Dundy  .  .   . 

5.00 

13.50 

13.97 

37.04 

Fillmore  . 

65.65 

92.50 

93.75 

70.97 

Franklin  
Frontier  

34.00 
15.20 

56.40 
23.75 

49.34 
24.14 

60.28 
64.00 

Furnas 

24.95 

42.40 

41.31 

58.85 

Gage 

63.50 

90.00 

89.76 

70.56 

Garden 

5.05 

11.50 

12.22 

43.91 

Garfield  .  .  . 

7.25 

15.75 

14.15 

46.03 

Gosper  

23.40 

41.25 

38.91 

56.73 

Grant  
Greeley 

3.40 
33.70 

5.75 
44.25 

5.09 
42.50 

59.13 
76.16 

Hall.... 

54.55 

81.75 

80.42 

66.73 

Hamilton  
Harlan  

75.15 
24.55 

110.00 
51.25 

108.49 
48.38 

68.32 
47.91 

Hayes  

5.75 

14.75 

15.26 

.  38.98 

Hitchcock  .  .  . 
Holt  

9.40 
11.15 

20.90 
26.00 

21.30 
24.30 

44.98 
42.89 

Hooker  

3.10 

6.45 

5.73 

48.07 

Howard  .  . 

39.35 

57.65 

59.55 

68.27 

The  Assessment  of  Real  Estate  65 

" Actual  Value1 '  of  Land  and  Improvements — Continued 


AVERAGE  VALUE  PER  ACRE 

Assessors' 
Value  Percent 
of  Railway 
Commission's 
Value 

Assessors 
1913 

Railway 
Commission 
1913 

Census 
1910 

Jefferson   

57.50 
65.75 
41.70 
5.35 
7.65 
5.70 
31.50 
73.00 
7.50 
4.60 
5.80 
58.25 
3.45 
49.55 
5.60 
50.35 
72.35 
47.65 
71.45 
65.10 
7.85 
38.50 
44.00 
67.40 
73.10 
16.60 
69.15 
6.65 
72.65 
79.45 
73.75 
24.15 
77.15 
5.80 
22.35 
3.95 
62.45 
53.65 
3.05 
66.40 
31.50 
79.50 
72.35 
46.00 
7.45 
81.25 

31.30 

77.50 
92.00 
82.00 
17.00 
20.00 
12.00 
51.50 
97.50 
19.80 
10.75 
13.50 
84.75 
7.25 
67.50 
14.60 
68.50 
97.00 
80.00 
96.50 
88.00 
15.75 
67.00 
67.00 
94.90 
102.75 
27.50 
90.50 
13.75 
101.00 
105.75 
107.50 
36.75 
99.50 
12.20 
41.50 
9.25 
95.75 
78.85 
6.30 
80.25 
54.50 
111.75 
100.00 
65.00 
13.87 
106.00 

42.42 

74.99 
85.42 
77.14 
16.43 
17.47 
11.66 
50.49 
94.46 
17.94 
9.85 
11.57 
76.59 
6.68 
65.50 
12.65 
65.14 
96.63 
79.55 
95.12 
80.25 
17.68 
65.57 
65.62 
93.53 
94.49 
30.99 
91.93 
13.61 
96.12 
106.13 
102.71 
38.45 
98.51 
12.67 
42.47 
8.35 
83.04 
80.90 
5.81 
67.92 
47.58 
104.34 
75.00 
40.00 
11.59 
106.96 

41.80 

74.20 
71.47 
50.85 
31.47 
38.25 
47.50 
61.17 
74.87 
37.88 
42.79 
42.96 
68.73 
47.59 
73.41 
38.36 
73.50 
74.59 
59.56 
74.05 
73.98 
49.84 
57.46 
65.67 
71.03 
71.14 
60.37 
76.41 
48.37 
71.93 
75.14 
68.60 
65.72 
77.53 
47.54 
53.86 
42.71 
65.22 
68.04 
48.41 
82.74 
57.80 
71.14 
72.35 
70.77 
53.71 
76.65 

73.79 

Johnson  

Kearney 

Keith                  .    .    . 

Keya  Paha  

Kimball  

Knox 

Lancaster     .... 

Lincoln  

Logan 

Loup 

Madison     

McPherson  

Merrick  

Morrill 

Nance 

Nemaha      

Nuckolls  
Otoe 

Pawnee   .... 

Perkins  

Phelps  

Pierce  

Platte 

Polk.. 

Red  Willow  

Richardson  .  . 
Rock  

Saline  

Sarpy.  

Saunders  

Scotts  Bluff  

Seward 

Sheridan 

Sherman  

Sioux  

Stanton 

Thayer 

Thomas  

Thurston  

Valley 

Washington 

Wayne  

Webster  

Wheeler... 

York 

State.  . 

66  Report  of  Nebraska  Tax  Commission 

The  table  shows  in  the  first  place  a  decided  under- valuation. 
The  Railway  Commission's  estimate  of  the  true  value  of  49,717,- 
600  acres  of  all  kinds  of  land  in  the  state  for  1913  is  $2,108,963,504, 
or  $42.42  per  acre.  The  assessors'  "  actual"  value  for  40,203,007 
acres  assessed  in  1913  was  $1,256,221,730,  or  $31.30  per  acre. 
This  is  73.79  per  cent  of  the  Commission's  value  based  on  land 
sales  and  bankers'  estimates.  It  will  be  noted  that  the  Commis- 
sion's figures  include  a  larger  area  than  the  assessors'  return. 
The  latter  of  course  took  no  account  of  the  government  lands, 
unsold  school  lands,  those  belonging  to  the  local  governments 
and  those  exempted  from  taxation  because  of  the  use  to  which 
they  are  put.  If  these  omitted  lands  had  been  included  in  the 
assessors'  figures,  the  disparity  between  the  two  estimates  would 
have  been  increased. 

The  law  requires  the  assessor  to  list  the  land  at  its  "actual 
value,"  one-fifth  of  which  is  taken  for  the  assessed  value.  In 
practice,  however,  each  assessor  sets  up  a  rule  for  himself.  In 
some  counties  the  practice  prevails  of  classifying  lands,  e.  g.  as 
level  farm  land,  rolling  farm  land,  pasture  land,  and  fixing  a  flat 
rate  per  acre  for  each  class.  One  assessor  estimates  the  true 
value  of  the  land  and  " throws  off"  $5.00  per  acre,  others  "throw 
off,"  10,  15,  or  20  per  cent,  each  assessor  being  in  this  matter  a 
law  unto  himself.  We  thus  have  differences  arising  from  the  delib- 
erate action  of  the  assessing  officers.  Other  disparities  naturally 
arise  from  differences  in  judgment  as  to  what  the  true  value  is, 
and  still  others  are  due  to  pressure  exerted  by  taxpayers.  The 
result  of  these  forces  is  gross  inequalities  in  assessing  this  most 
important  item  on  the  rolls.  It  is  a  matter  of  common  observa- 
tion that  properties  in  cities  of  moderate  value  are  assessed  at 
a  higher  percentage  of  their  value  than  the  more  expensive  ones, 
and  that  residence  property  is  assessed  at  a  higher  percentage 
than  business  property.  The  most  important  immediate  problem 
connected  with  real  estate  taxation,  therefore,  is  the  elaboration 
of  means  of  securing  a  full  and  fair  valuation. 

Improved  Methods  of  Assessment. — The  value  of  a  thing 
is  what  it  will  sell  for  under  normal  conditions.  The  work  of  the 
assessor  is  to  determine  as  accurately  as  possible  what  property 
would  bring  if  offered  freely  for  sale.  Valuation  by  buyers  is 
a  matter  of  judgment  on  their  part.  It  must  always  be  a  matter 
of  judgment  for  the  assessor.  All  the  law  can  do  is  to  aid  him  by 


The  Sales  Method  67 

making  available  for  his  guidance  such  information  as  it  is  pos- 
sible Jto  provide. 

|  The  Sales  Method. — Many  assessors  make  use  of  the  sales 
of  real  estate  which  come  to  their  notice  as  a  guide  in  valuing 
not  only  the  property  sold,  but  also  similar  property  not  trans- 
ferred. The  sale  price  is  not  an  absolute  measure  of  a  proper 
assessment.  The  price  may  in  any  given  sale,  owing  to  peculiar 
conditions,  be  either  higher  or  lower  than  the  true  market  value 
of  the  property.  Nevertheless  in  the  price  at  which  land  actually 
changes  hands  the  assessor  has  perhaps  the  best  single  guide  to 
proper  valuation.  We  are  convinced  that  if  assessors  made 
systematic  use  of  the  information  which  could  be  gotten  from  the 
record  of  .transfers  and  from  other  sources  a  vast  gain  in  accuracy 
of  assessment  would  be  made.  It  should  be  the  duty  of  the  reg- 
ister of  deeds  to  certify  to  the  county  assessor  the  description, 
date  of  sale  and  consideration  in  the  deed  of  each  parcel  of  land 
transferred.  What  use  the  assessor  shall  make  of  such  informa- 
tion must  be  left  to  his  discretion. 

True  Consideration  in  Deeds. — Unfortunately  the  in- 
formation given  in  the  records  is  often  misleading  owing  to  the 
frequent  practice  of  inserting  nominal  consideration  in  deeds. 
We  have  given  some  study  to  the  question  as  to  whether  a  dis- 
closure of  the  true  consideration  should  be  required,  if  not  in  the 
deed,  then  in  a  separate  sworn  statement  to  be  used  by  the 
assessor  for  official  purposes  only.  Proposals  of  this  kind  have 
been  recommended  by  several  tax  commissions  and  bills  em- 
bodying the  plan  have  been  before  several  legislatures,  including 
those  in  Arizona,  Colorado,  Connecticut,  Maryland,  Illinois, 
New  York,  Pennsylvania,  Rhode  Island,  Utah  and  Wisconsin. 
As  far  as  we  have  learned,  no  state  has  yet  enacted  such  a  law. 
The  value  of  the  information  the  records  would  soon  contain 
would  go  far  toward  correcting  the  inequalities  now  complained 
of,  and  the  supposed  advantage  of  speculators  in  land  should 
not  be  allowed  to  stand  in  the  way  of  such  a  reform.  As  was 
well  said  by  the  Ohio  Tax  Commission  in  its  report  for  1911: 
"The  assessment  of  property  is  a  public  function.  The  law 
provides  the  machinery  for  ascertaining  values,  and  it  would 
seem  proper  that  the  state  should  provide  the  best  information 
upon  which  the  assessor  can  base  his  action.  It  should  put  into 
his  hands  the  most  effective  tools  for  this  purpose.  Men  engaged 


68  Report  of  Nebraska  Tax  Commission 

in  legitimate  business,  whose  business  tends  to  distribute  real 
property  on  a  fair  basis,  should  welcome  a  measure  of  this  kind. 
It  would  tend  to  give  confidence,  and  the  assessment  would 
furnish  a  criterion  of  values  upon  which  trades  would  be  apt  to 
be  made." 

The  seriousness  of  the  handicap  upon  assessors  which  the 
present  practice  imposes  is  brought  out  by  the  Commissioners  of 
Taxes  and  Assessments  of  New  York  City  in  their  report  for 
1913: 

"During  the  last  twenty-five  yearst  he  practice  of  inserting 
a  nominal  consideration  in  deeds  has  become  so  universal  that 
only  about  one  deed  in  twenty  contains  the  actual  consideration 
for  transfer.  The  custom  conceals  95  per  cent  of  the  best  evidence 
of  the  value  of  real  property;  it  operates  to  the  detriment  of  the 
of  the  business  of  real  estate  brokerage,  by  causing  a  well  grounded 
fear  on  the  part  of  investors  that  they  will  be  deceived  as  to  the 
value  of  real  estate.  Any  practice  which  checks  the  diffusion  of 
real  estate  ownership  is  a  detriment  to  the  community. 

The  concealment  of  the  actual  prices  paid  for  real  estate 
forces  the  department  to  waste  much  valuable  time  in  a  hunt  for 
what  ought  to  be  a  matter  of  record.  Sometimes  deputies  are 
deceived  and  suppose  that  the  consideration  was  greater  or  less 
than  it  really  was.  If  they  had  all  the  considerations  for  actual 
sales,  those  that  were  at  peculiarly  high  or  low  prices  would 
stand  out  from  the  rest  and  would  be  discredited  as  evidences  of 
value. 

It  is  rather  an  extraordinary  fact  that  whereas  the  price 
of  real  estate  is  the  most  important  price  to  know  from  the 
standpoint  of  taxation  it  is  the  most  inaccessible  price  to  obtain. 
Stocks  and  bonds  are  quoted  daily  on  the  Stock  Exchange.  On 
Produce  Exchange  we  have  daily  quotations  of  all  kinds  of 
produce;  the  Metal  Exchanges  give  us  the  prices  of  metals. 
Inquiry  at  any  retail  store  gives  actual  prices  of  every  conceivable 
kind  of  goods.  Practically  the  only  price  that  is  today  concealed 
is  the  price  paid  for  real  estate. 

In  1911  and  1912  the  New  York  State  Conferences  on  Taxa- 
tion recommended  a  bill  to  require  an  affidavit  setting  forth  the 
true  consideration  for  every  transfer  of  real  estate.  In  1913  a 
bill  having  the  same  object  was  introduced  in  the  legislature, 
which  attempted  the  same  result  by  penalizing  the  record  of  a 
deed  which  does  not  contain  a  statement  of  the  actual  considera- 
tion. The  principle  of  these  bills  was  endorsed  by  Judges  Gilder- 
sleeve,  Brady  and  Ford.  Also  by  Mr.  Seth  Low  and  Mr.  James 
L.  Wells,  a  former  president  of  the  Tax  Department  under  Mayor 
Low;  by  Mr.  Feitner,  another  president  of  the  Tax  Department 


Classification  of  Real  Estate  69 

and  by  Mr.  William  R.  Wilcox,  recently  president  of  the  Public 
Service  Commission,  and  by  the  late  Mr.  Edward  M.  Shepard. 
Men  well  known  for  their  knowledge  of  real  estate  have  given 
their  hearty  approval  of  the  form  and  principle  of  the  bill,  among 
them  being  Charles  S.  Brown,  Robert  E.  Dowling,  Francis  E. 
Ward,  John  L.  Parish,  Joseph  P.  Day  and  Seth  B.  Robinson." 

We  believe  the  time  has  come  to  adopt  the  principle  in  legisla- 
tion that  the  state  has  a  right  to  this  information.  The  Federal 
government  has  asserted  it  in  connection  with  the  administration 
of  stamp  duties  on  transfers,  and  it  has  become  an  important 
feature  of  the  Alberta  increment  tax  law  described  elsewhere  in 
this  report. 

Classification  of  Real  Estate. — Better  assessments  could 
be  made  if  lands  were  better  classified.  The  legislature  has  already 
provided  for  classifying  lands  and  lots  as  improved  and  unim- 
proved and  classification  should  be  carried  farther.  The  law 
permits  the  assessor  to  list  as  one  tract  as  much  as  a  section  of 
land  when  it  belongs  to  one  owner.  There  would  be  no  objection, 
perhaps,  to  the  assessment  going  on  the  roll  in  this  way  if  the 
assessor  has  an  accurate  knowledge  of  the  amount  of  the  different 
grades  of  land  in  the  tract,  and  has  made  a  careful  valuation  of 
each  grade  in  fixing  his  value  of  the  whole.  Equalizing  boards 
are  helpless  without  the  knowledge  supplied  by  classification. 
The  higher  or  lower  valuation  per  acre  in  different  townships  or 
counties  means  nothing  unless  the  proportions  of  different  grades 
of  land  are  known.  Every  time  an  equalization  is  to  be  made 
by  the  state  board  representatives  of  the  counties  affected  appear 
before  the  board  and  vie  with  one  another  in  ascribing  to  their 
respective  counties  large  tracts  of  rough,  over-flow,  and  waste 
lands.  They  furnish  no  accurate  data  because  they  have  none; 
nor  has  the  board;  it  has  nothing  to  act  upon  but  general  impres- 
sions. In  the  interest,  therefore,  of  a  better  original  assessment, 
and  of  a  more  careful  equalization,  classification  of  lands  is  re- 
quired. 

Mr.  E.  W.  Reed,  formerly  right-of-way  statistician  to  the 
Railway  Commission,  presented  to  this  Commission  a  plan  of 
classifying  lands  for  purposes  of  valuation  which  we  believe 
would  be  of  considerable  service.  His  plan  is  to  establish  classes 
of  land  as  "  level  farm  lands,  rolling  farm  lands/'  etc.,  etc.,  and 
then  have  the  county  assessor,  with  the  aid  of  the  leading  real 


70  Report  of  Nebraska  Tax  Commission 

estate  dealers,  bankers  and  others  having  expert  knowledge, 
fix  a  fair  and  reasonable  valuation  for  each  grade  of  land.  The 
Kansas  Tax  Commission  has  had  made  a  classification  of  the 
lands  of  that  state  under  headings  corresponding  substantially 
to  those  proposed  by  Mr.  L.  L.  Powers  of  the  Census  Bureau,  as 
follows:  Bottom  land,  upland;  cultivated,  arable;  timber  used 
for  pasture,  timber  not  so  used;  orchard;  pasture,  tillable  and 
non-tillable;  waste.  The  actual  work  of  classifying  the  lands 
was  left  to  the  local  assessors,  and  this  was  also  a  part  of  the 
plan  of  Mr.  Reed.  No  doubt  more  accurate  information  can  be 
collected  in  this  way  than  has  heretofore  been  available;  but 
it  would  seem  that  under  such  a  plan  the  same  tendency  must 
show  itself  to  under-classification  that  there  now  is  toward  under- 
valuation. The  opinion  of  men  having  the  practical  knowledge 
of  the  productive  power  of  the  soil  is  needed  for  making  a  classi- 
fication survey;  but  their  opinion  should  be  guided  and  checked 
by  scientifically  established  facts  where  possible. 

A  body  of  facts  of  this  kind  is  being  accumulated  by  the 
State  Soil  Survey,  and  by  the  United  States  Topographical 
Survey.  The  government  has  covered  about  40  per  cent  of  the 
area  of  the  state  including  roughly  the  southern  half  of  the  state 
except  the  extreme  southwestern  corner.  The  Soil  Survey  is 
making  a  more  detailed  study  of  the  character  of  the  soil  and  the 
data  supplied  by  it  will  be  of  great  value  to  taxing  officers  when 
published.  Thus  far  the  maps  for  only  Otoe  county  have  been 
published.  But  surveys  have  been  made  for  Thurston,  Seward, 
Gage,  Nemaha,  Sarpy,  Douglas,  Cass,  Saunders,  Lancaster,  and 
Scotts  Bluff  counties  and  parts  of  a  few  others.  The  topograph- 
ical work  of  the  United  States  government  naturally  precedes 
the  survey  of  the  soils,  and  is  a  necessary  preliminary,  morever, 
not  only  to  that  work,  but  also  to  the.  work  of  the  State  Geological 
Survey.  It  is  understood  that  the  present  policy  of  the  govern- 
ment is  to  require  co-operation  on  the  part  of  the  states  in  work- 
ing out  the  topography  of  the  country  on  the  theory  that  the 
states  have  a  vital  interest  in  such  work  and  that  they  should 
contribute  to  the  expense.  The  government  offers,  however, 
to  duplicate  any  amount  the  state  will  provide  for  carrying  for- 
ward the  topographical  survey.  In  view  of  the  dependence  of 
state  activities  upon  the  completion  of  this  survey,  it  would 
seem  wise  to  hasten  the  completion  of  this  foundation  work. 


Tax  Maps  71 

The  maps  thus  supplied,  supplemented  by  the  detailed  work  of 
the  soil  survey  would  be  an  invaluable  aid  in  making  a  proper 
classification  of  lands.  They  can  also  be  used  as  a  base  for  the 
tax  maps  discussed  below  without  any  great  additional  expense. 

We  recommend,  therefore,  that  provision  be  made  by  law 
for  supplying  county  assessors,  county  boards  and  the  state 
board  of  equalization  with  these  maps  as  fast  as  completed. 

Tax  Maps. — Special  maps  made  for  the  use  of  taxing  officers 
have  been  found  highly  useful  where  employed.  Their  use  has 
grown  up  especially  in  the  larger  cities  of  the  country  where 
the  assessing  authorities  have  most  keenly  felt  the  need  of  them. 
While  more  needed  in  the  cities,  they  are  equally  applicable  to 
rural  lands.  They  must  show  accurately  the  boundaries  of  each 
parcel  and  should  be  on  a  large  enough  scale  to  permit  the  nota- 
tion of  sale  prices,  asking  price  of  property  offered  for  sale,  unit 
values  and  the  assessed  valuation.  The  value  of  such  maps  con- 
sists in  the  accuracy  which  can  thus  be  secured  as  to  the  area  of 
each  parcel,  in  preventing  omissions,  and  in  bringing  into  a  rela- 
tion where  they  can  be  easily  seen  the  assessments  of  contiguous 
tracts. 

Aid  of  Experts. — It  is  quite  possible  to  over-estimate  the 
importance  of  such  devices  as  the  sales  method,  classification 
and  tax  maps.  In  fact  there  is  a  tendency  just  now  to  make  a 
fetish  of  them.  No  one,  however,  who  has  studied  the  problem 
of  assessment  can  doubt  their  great  importance;  but  after  all  is 
said  and  done,  they  are  only  aids,  and  the  assessment  must  rest 
back  finally  upon  the  judgment  of  the  assessor.  In  many  cities 
the  assessor  follows  the  practice  of  calling  real  estate  men  and 
others  having  the  first  hand  knowledge  of  values  to  help  him  in 
fixing  his  valuations.  This  is  an  important  feature  of  the  so- 
called  Somers  System  now  being  employed  in  many  places.  The 
assessment  board  in  New  York  City  has  long  followed  the  plan. 
It  is  found  that  the  publicity  thus  given  to  the  work  insures  more 
accurate  valuations  and  a  higher  degree  of  satisfaction  on  the  part 
of  taxpayers  than  when  the  valuations  are  made  in  the  seclusion 
of  the  assessor's  office,  or  with  the  questionable  aid  perhaps  of 
the  owner  of  the  property.  This  method  of  appeal  to  community 
judgment  is  not  one  which  can  well  be  required  by  law.  It  is 
a  matter  of  administration  to  be  adopted  on  the  initiative  of  the 
assessor  or  on  that  of  the  officer  or  officers  charged  with  super- 


72  Report  of  Nebraska  Tax  Commission 

vising  his  work.  We  believe  that  its  general  adoption  for  both 
city  and  rural  property  would  result  in  a  great  improvement  in 
the  real  estate  assessment.  It  is  highly  important  that  assessors 
should  be  put  in  touch  with  the  literature  of  this  subject,  in  a  form 
suitable  for  their  use. 

To  sum  up :  The  whole  trend  of  tax-reform  as  far  as  method 
of  assessment  is  concerned  is  in  the  direction  of  greater  accuracy. 
Effort  is  directed  toward  the  elimination  of  the  personal  equation 
of  the  assessor  by  giving  to  him  the  benefit  of  community  judg- 
ment, expert  council,  working  rules  based  on  wide  experience 
and  wise  guidance  of  supervising  officers.  The  use  of  the  devices 
suggested  involves  some  additional  expense  but  the  expenditure 
is  well  worth  making.  Justice  as  between  man  and  man  in  im- 
posing the  burden  of  maintaining  the  government  is  the  end 
sought  and  it  must  be  as  nearly  attained  as  possible  regardless  of 
the  cost. 

The  Assessment  of  Buildings. — The  law  requires  the 
separate  assessment  of  "improvements/'  but  there  is  no  definition 
of  the  term  and  the  state  board  has  made  no  ruling  on  the  subject. 
Doubtless  the  practice  varies,  but  the  most  usual  one  is  to  include 
buildings  only.  In  the  interest  of  uniformity  the  assessors  should 
be  instructed  what  to  include  under  the  head  of  improvements. 

The  assessment  of  buildings  is  itself  a  difficult  task.  Some 
counties  make  no  return  under  this  head,  and  too  often  the 
valuation  is  haphazard  guess  work.  This  is  hardly  the  place  to 
discuss  the  proper  method  of  assessment.  It  would  be  part  of 
the  duty  of  a  permanent  commission  to  settle  broad  questions  of 
policy  such  as  what  should  be  included  under  improvements, 
methods  of  computing  cost  of  buildings  of  different  construction, 
the  rate  of  depreciation  and  the  like.  A  great  body  of  informa- 
tion on  this  and  other  phases  of  valuation  is  being  published 
embodying  the  experience  of  those  who  have  become  skilled  in 
certain  branches  of  work  of  assessment.  If  our  recommendation 
for  assessing  improvements  at  a  lower  percentage  of  their  actual 
value  than  land  be  adopted  by  the  legislature,  the  method  of 
assessing  buildings  will  become  one  of  great  importance. 

Publicity  of  Assessments. — The  result  of  the  assessment 
should  be  given  the  widest  publicity.  This  should  be  done  in  the 
case  of  personal  as  well  as  real  estate  assessments.  At  present 
no  provision  is  made  for  notifying  taxpayers  of  the  amount  of 


Publicity  of  Assessments  73 

their  assessment  except  upon  request  for  a  written  statement. 
Such  a  request  is  rarely  made,  the  taxpayer  relying  upon  his 
recollection  of  the  values  tentatively  agreed  upon  with  the 
assessor,  or  set  down  by  him  if  he  makes  out  and  mails  his  own 
schedule.  The  error  is  often  made  of  thinking -that  the  values 
so  set  down  are  the  assessment.  But  it  must  be  remembered 
that  the  listing  of  property  and  the  assessment  are  two  different 
things.  It  is  the  duty  of  the  owner  to  take  the  first  step  and  of 
the  assessor  to  fix  the  value.  Many  assessors  feel  free  to  revise 
values  given  in  by  the  owner  "on  fuller  consideration"  or  "on 
later  information";  and  it  is  proper  that  they  should.  The 
law  gives  large  discretion  to  taxing  officers  at  every  stage  of  the 
process  to  make  changes  that  will  bring  about  a  full  and  fair 
assessment.  But  provision  should  be  made  for  informing  each 
person  of  the  amount  fixed  by  the  assessor.  The  supreme  court 
has  held  that  while  the  county  assessor. may  change  the  schedule 
of  a  taxpayer  and  add  to  it  such  property  as  has  been  omitted, 
"before  making  such  change  or  addition  to  the  schedule  he  must 
give  notice  to  the  taxpayer  of  his  intention  to  do  so,  and  thus 
afford  him  an  opportunity  for  a  hearing.  It  seems  clear  from  the 
authorities  that  such  change  or  addition  made  without  notice 
and  without  an  opportunity  for  a  hearing  somewhere  along  the 
line  of  procedure  is  void,  for  it  amounts  to  "taxing  the  property 
of  the  citizen  without  due  process  of  law."  Bankers  Life  Insur- 
ance Co.  v.  County  Board,  89  Neb.,  469-472. 

The  law  should  be  so  amended  as  to  require  the  assessor 
at  the  time  of  viewing  and  listing  to  give  to  the  owner  a  state- 
ment of  the  amount  of  his  provisional  assessment  with  the  under- 
standing that  it  is  subject  to  revision  upon  notification. 

The  taxpayer  has  a  right  to  know  not  only  what  his  own 
assessment  is',  but  that  of  his  neighbor  as  well.  The  law  gives 
one  the  right  to  appear  before  the  county  board  of  equalization  to 
complain  of  the  undervaluation  of  his  neighbor's  property,  but 
gives  him  no  adequate  means  of  ascertaining  what  that  assessment 
is.  If  feasible  it  would  be  desirable  to  have  assessments  pub- 
lished before  equalization,  but  such  a  plan  presents  certain  diffi- 
culties. There  is  no  reason,  however,  why  the  equalized  assess- 
ment should  not  be  published  for  the  information  of  taxpayers. 
This  is  done  in  many  places.  Sometimes  only  the  personal  list 
is  published,  sometimes  only  the  real  estate,  but  often  together, 


74  Report  of  Nebraska  Tax  Commission 

The  city  of  Lowell,  Massachusetts,  for  example,  publishes  a 
pamphlet  giving  for  the  whole  city  the  following  items:  Per- 
sonal value,  buildings  value,  law  value,  value  per  foot,  total  tax. 
In  other  places  such  information  is  provided  for  each  ward  sepa- 
rately. The  publicity  thus  given  to  the  equalized  valuation,  es- 
pecially of  real  estate  would  contribute  much  to  securing  a  careful 
and  fair  valuation. 

Recommendations. — It  is  recommended  therefore: 

1.  That  the  law  be  so  amended  as  to  require  tl  e  assessor 
at  the  time  of  viewing  and  listing  property  to  give  the  owner  a 
written  statement  of  the  amount  of  his  assessment  and  to  notify 
him  of  any  change  made  in  the  schedule  thereafter. 

2.  That  provision  be  made  for  giving  publicity  to  the 
equalized  assessment  of  personal  and  real  property. 

Quadrennial  Assessments. — Prior  to  the  revision  of 
1903  the  assessment  of  real  estate  was  made  annually.  The  new 
law  provided  for  the  quadrennial  assessment  of  this  class  of 
property.  Authority  is  given  the  County  Board  of  Equalization, 
at  any  of  its  annual  meetings  to  change  assessments  on  real  estate 
"in  cases  of  evident  error  or  of  apparent  gross  injustice"  resulting 
from  over- valuation  or  or  under- valuation.  As  explained  above, 
additions  or  deductions  are  made  in  case  improvements  are  added 
or  destroyed.  An  amendment  made  in  1911  seems  to  give  the 
county  board  power  in  even  numbered  years  "to  equalize  the 
valuation  of  real  property"  without  any  new  assessment.  Under 
this  provision  several  counties  in  1914  lowered  their  real  estate 
valuations.  It  is  understood  that  this  amendment  was  expected 
to  operate  with  other  proposed  changes  which  failed  to  become 
law.  As  the  law  now  stands  confusion  is  caused  by  the  provision 
and  if  quadrennial  assessments  are  continued  we  recommend  the 
repeal  of  the  amendment  of  1911. 

But  should  the  quadrennial  assessment  be  retained?  It 
has  been  argued  before  the  Commission  that  it  involves  great 
injustice.  When  poor  assessments  are  made  they  in  most  cases 
remain  unchanged  for  four  years.  Aggrieved  parties  may,  it  is 
true,  make  complaint  and  secure  relief,  but  as  a  matter  of  fact  for 
a  variety  of  reasons  comparatively  few  avail  themselves  of  the 
right.  On  the  other  hand,  those  who  are  assessed  too  low  have  an 
undue  advantage  for  four  years.  Again  it  is  argued  that  even 
though  a  good  assessment  is  made,  changes  in  values  occur  that 


Quadrennial  Assessments  75 

ought  not  to  be  disregarded  for  three  or  four  years.'  For  example, 
the  law  seems  to  give  no  power  to  change  the  assessment  if  properly 
made  in  the  first  place,  whatever  the  change  in  value  may  be. 
Again,  the  quadrennial  assessment  has  been  highly  advan- 
tageous to  owners  of  real  estate  during  the  period  of  rapid  rise 
in  land  values  since  1904.  This  is  shown  by  the  assessments  of 
1908  and  1912.  In  1904  the  assessment  of  real  estate  amounted 
to  182  millions.  By  1907  this  had  been  increased  by  the  addition 
of  improvements  and  extensions  of  the  area  assessed  to  193 
millions.  The  assessment  for  1908  rose  to  255  millions,  and  this 
probably  fell  short  of  the  increase  in  value  that  had  taken  place 
during  the  quadrennium.  Again,  in  1912  there  was  a  jump  from 
267  million  to  319  million  although  most  of  the  increase  had  taken 
place  long  before  that  year.  The  evil  is  increased  by  the  fact 
that  values  do  not  change  evenly  in  all  parts  of  the  state,  or  in  all 
parts  even  of  the  same  community.  In  urban  communities 
especially  values  shift  quickly  and  unevenly;  and  frequent 
assessments  should  be  made  in  order  to  register  the  changes. 

On  the  other  hand,  it  is  held  that  the  present  plan  gives 
greater  stability  in  the  valuations  in  the  assessment  rolls  than 
would  be  possible  under  a  shorter  term.  This  might  prove  a 
matter  of  some  importance  to  those  institutions  which  depend 
upon  a  permanent  millage  tax  for  support  since  it  enables  them 
to  estimate  their  future  revenues  with  greater  accuracy.  Still 
this  advantage  can  be  easily  over-estimated.  On  the  whole,  these 
institutions  under  normal  conditions  have  more  to  gain  than  to 
lose  by  more  frequent  assessments.  But  whether  this  is  true  or 
not,  their  interests  should  not  be  allowed  to  stand  in  the  way  of 
adopting  a  more  just  rule. 

Another  argument  against  more  frequent  assessment  is  the 
increased  cost  it  would  entail.  We  have  no  data  showing  what 
the  cost  of  such  assessment  is.  If,  however,  the  recommenda- 
tions of  the  Commission  are  accepted  for  making  the  county  as- 
sessor the  assessor  in  fact  as  well  as  in  name,  the  increased  cost 
would  practically  be  covered  by  the  cost  of  preparing  the  books. 
The  valuation  would  be  in  progress  during  the  whole  year  and  the 
assessment  the  first  of  April  would  involve  only  the  cost  of  tran- 
scription. 

It  was  argued  at  the  time^thejpresentjaw  was  enacted  that 
the  quadrennial  assessment  would J)e  an  advantage  to  those  who 


76  Report  of  Nebraska  Tax  Commission 

were  dealing  in  real  estate.  An  increase  in  the  valuation  of  a 
piece  of  land  carrying  with  it  an  increase  in  the  tax  has  the  effect, 
other  conditions  remaining  the  same,  of  depressing  the  value  of 
the  real  estate  by  an  amount  equal  to  the  capitalized  value  of 
the  increase  of  the  tax  at  the  current  rate  of  interest.  A  dealer's 
calculations  might  thus  be  seriously  affected  by  an  increased 
assessment;  but  this  seems  no  valid  reason  for  retaining  a  plan 
which  carries  with  it  evident  injustice  to  large  numbers  not  in- 
terested in  speculation. 

Recommendations. — In  the  opinion  of  the  Commission, 
the  weight  of  argument,  therefore,  is  against  the  quadrennial 
assessment.  If  that  is  abandoned  what  should  be  substituted 
for  it? 

As  far  as  we  have  been  able  to  learn,  the  practice  in  the 
various  states  is  as  follows:  28  states  have  annual  assessments  of 
real  estate;  5  have  biennial;  and  5  have  quadrennial  assessments. 
In  our  opinion  all  interests  would  be  best  conserved  by  a  biennial 
assessment.  We,  therefore,  recommend  that  the  law  be  so 
amended  as  to  require  a  new  assessment  of  real  property  in  1916 
and  biennially  thereafter. 

Forest  Taxation. — The  taxation  of  timber  lands  presents 
some  special  problems.  A  peculiar  feature  of  this  kind  of  property 
is  the  great  length  of  time  that  must  elapse  between  the  planting 
of  forest  trees  and  their  maturity.  The  imposition  of  the  usual 
ad  valorem  tax  upon  it  is  for  obvious  reasons  destructive  of  the 
industry.  During  recent  years  much  attention  has  been  given  to 
this  phase  of  real  estate  taxation.  There  are  those  who  advocate 
the  plan  of  total  exemption  of  forest  lands  as  an  encouragement  to 
timber  culture.  Another  plan  is  to  substitute  for  all  annual 
taxes  a  tax  upon  the  yield  at  time  of  cutting.  Both  these  plans 
would  involve  the  surrender  of  a  source  of  public  revenue,  in  the 
latter  case  for  a  term  of  years,  in  the  former  permanently.  A 
third  plan  is  to  combine  the  annual  land  tax  and  a  yield  tax.  This 
seems  the  fairest  method  for  all  interests  concerned.  Lands  that 
have  a  use  value  aside  from  the  timber  would  thus  be  required  to 
contribute  moderately  to  the  public  revenues  without  discourage- 
ment to  tree  planting;  and  when  great  values  have  thus  been  pro- 
duced they  become  a  proper  object  of  taxation.  A  fourth  plan  is 
to  tax  the  land  but  exempt  the  value  due  to  the  presence  of 
growing  trees.  This  is  the  method  provided  by  the  present  law 


Forest  Taxation  77 

in  this  state.  The  statute  provides  that  "the  increased  value 
of  lands  by  reason  of  live  fences  and  forest  trees  grown  and 
cultivated  thereon  shall  not  be  taken  into  account  in  the  assess- 
ment thereof."  It  is  probable  that  assessors  give  little  heed  to 
this  broad  provision,  but  the  right  to  exemption  may  be  claimed  at 
any  .time.  This  would  seem  to  be  all  the  encouragement  that 
could  reasonably  be  demanded  for  this  branch  of  industry. 
The  exemption  now  permitted  is  warranted  only  by  the  peculiar 
character  of  timber  culture  and  its  great  social  significance. 
There  is  danger,  indef  d,  that  if  the  law  should  prove  successful  in 
promoting  the  successful  planting  of  considerable  areas  the 
liberal  exemption  now  allowed  might  be  withdrawn  to  the  injury 
of  those  who  had  embarked  in  such  enterprises. 

We  do  not  recommend  any  change  in  the  law  at  the  present 
time;  but  it  is  a  subject  that  may  well  be  given  study  in  the 
near  future.  Opinions  differ  as  to  whether  the  development  of 
commercial  timber  culture  may  reasonably  be  expected  in  this 
state.  The  experiments  now  under  way  by  the  federal  govern- 
ment at  Halsey  ought  ere  long  to  throw  light  upon  this  subject 
and  furnish  a  guide  to  the  legislature  in  dealing  with  the  matter 
in  a  comprehensive  way. 

Increment  Taxation. — The  difference  in  economic  char- 
acter between  land  and  most  other  kinds  of  property  has  long 
been  recognized,  though  rarely  in  the  tax  laws.  Under  the  gen- 
eral property  tax  all  kinds  of  property  have  been  treated  alike. 
A  revenue  system  based  on  the  inflexible  rule  of  uniformity  where 
such  great  variety  exists  is  crude  and  must  in  time,  as  we  have 
argued  elsewhere,  give  way  to  a  rational  classification  of  property. 
We  have  recommended  that  intangibles  be  placed  in  a  class  by 
themselves  and  subjected  to  a  lower  rate,  and  that  improvements 
be  assessed  at  a  lower  percentage  of  their  actual  value  than  land. 
We  wish  now  to  call  attention  to  another  feature  of  land  taxation 
which  is  commanding  an  increasing  amount  of  attention  and  has 
already  been  embodied  in  practical  legislation  in  some  places. 

This  new  feature  of  taxation  consists  in  appropriating  for 
the  public  use  some  part  or  all  of  the  future  increase  in  the  value 
of  land.  The  means  by  which  this  end  is  accomplished  varies  in 
different  places,  but  everywhere  it  is  through  a  special  tax  upon 
increases  in  the  value  of  land  in  addition  to  the  usual  tax  on 
the  land  according  to  its  present  value.  The  first  example^of 


78  Report  of  Nebraska  Tax  Commission 

this  kind  of  tax  was  that  laid  by  the  Germans  in  their  colony  of 
Kiauchau  in  1898.  Large  expenditures  were  to  be  made,  a  great 
port  was  to  be  developed  and  it  was  foreseen  that  speculators 
would  rush  in  to  buy  up  land  they  did  not  intend  to  develop  in 
order  to  secure  the  rise  in  value  certain  to  follow.  It  seems  that 
the  government  at  first  proposed  to  retain  control  of  the  territory 
and  profit  by  the  rise,  but  for  some  reason  this  had  to  be  given 
up  and  a  scheme  for  taxing  the  increase  in  value  was  adopted. 
The  plan  was  quickly  seized  upon  by  many  cities  in  Germany  as 
affording  an  appropriate  revenue.  Down  to  1911  when  an  im- 
perial increment  tax  was  adopted  4,500  municipalities  had  enacted 
some  kind  of  an  increment  tax  law.  The  nature  and  variety  of 
these  laws  are  indicated  by  the  following  summary  by  Professor 
E.  R.  A.  Seligman: 

"The  increased  value  on  which  the  tax  was  applied  was 
generally  interpreted  to  mean  the  difference  between  the  last  pur- 
chase price  and  the  present  selling  price.  Allowance  was  almost 
universally  made  for  expenditures  incurred  in  the  improvement  of 
the  land  and  for  the  cost  of  new  buildings  or  rebuilding.  Allow- 
ance was  also  usually  made  for  a  sum  equivalent  to  the  stamp  tax, 
the  transfer  tax  and  other  fees  connected  with  the  change  of  owner- 
ship. A  further  sum  was  usually  allowed  representing  the  interest 
(not  compounded)  from  the  time  of  the  last  sale  to  the  present 
transfer.  In  some  places  these  sums,  especially  the  cost  of  im- 
provements, were  subtracted  from  the  selling  price,  while  in 
others  they  were  added  to  the  purchase  price.  In  some  places 
again,  where  certain  parcels  of  an  entire  tract  owned  by  a  single 
individual  had  been  sold  at  a  loss,  allowance  was  made  therefor, 
provided  that  the  losing  sales  occurred  at  the  same  time  as  those 
that  were  profitable,  or  within  a  limited  period  previous  thereto. 
In  most  cases,  again,  slight  increases  of  value  were  exempted.  The 
tax  applied  in  general  only  to  increments  of  value  exceeding  10 
per  cent;  sometimes,  however,  it  began  only  at  20  per  cent,  and 
in  Frankfort  only  at  30  per  cent.  The  rates  were  almost  always 
progressive,  but  the  minima  and  maxima  varied  greatly.  Thus 
in  Hamburg  the  rates  were  graduated  from.  1  to  12J  per  cent, 
while  in  Cologne  they  rose  from  10  to  25  per  cent.  In  Gelsen- 
kirchen  the  maximum  was  30  per  cent.  The  scale  of  progression, 
moreover,  varied  considerably,  from  1  per  cent  for  each  10  per- 
cent increase  of  value,  as  in  Cologne,  up  to  10  per  cent  for  each 
5  per  cent  increase  in  value  in  some  other  cities.  The  maximum 
limits  varied  still  more  widely:  In  Paderborn,  for  instance,  the 
highest  rate  (15  per  cent)  was  imposed  in  case  of  an  increase  of 
value  of  over  75  per  cent,  while  in  other  townsjthe  increase  of 


Increment  Taxation  79 

value  taken  into  account  in  determining  the  rate  was  consider- 
ably higher,  rising  in  some  cases  to  200  per  cent.  The  highest  tax 
imposed  anywhere  was  30  per  cent  where  the  increase  of  value 
was  over  155  per  cent." 

The  same  principle  was  adopted  by  the  British  Parliament 
after  a  notable  struggle  over  the  budget  of  1909.  In  October, 
1913,  the  Province  of  Alberta  enacted  a  law  providing  for  an 
increment  tax.  While  designed  for  the  benefit  of  the  provincial 
treasury,  the  tax  is  practically  confined  to  urban  lands.  It  does 
apply  to  high  priced  farm  lands  (worth  over  $50  per  acre)  when 
held  in  large  tracts  (over  640  acres).  The  law  provides: 

"That  there  shall  be  paid  upon  the  registration  under  The 
Land  Titles  Act  of  any  transfer  of  land  a  tax  of  5  per  cent  on  the 
increased  value  of  the  said  land  over  and  above  the  value  thereof 
according  to  the  last  preceding  value  for  the  purposes  of  this 
Act;  excluding  in  all  cases  the  cost  of  improvements  or  develop- 
ment work  actually  made  or  done  upon  or  in  connection  with  the 
said  land." 

All  these  increment  taxes  seek  to  reach  only  that  part  of  the 
increased  value  which  is  "unearned,"  that  is,  which  is  due  to 
what  Mill  calls  "the  ordinary  progress  of  a  society  which  in- 
creases in  wealth,  and  which  is  at  all  times  tending  to  augment 
the  incomes  of  landlords;  to  give  them  both  a  greater  amount 
and  a  greater  proportion  of  the  wealth  of  the  community,  in- 
dependently of  any  trouble  or  outlay  incurred  by  themselves." 
From  the  time  of  Adam  Smith  economists  have  recognized  the 
peculiarity  of  ground-rents,  and  the  value  of  land  that  they  con- 
stantly tend  to  increase  without  any  exertion  or  sacrifice  on  the 
part  of  the  owners;  that  owners  of  land  as  Mill  puts  it  "grow 
richer  as  it  were  in  their  sleep,  without  working,  risking  or  econ- 
omizing"; and  that  the  increasing  value  of  land  or  the  rent 
arising  from  it,  therefore,  is  a  proper  subject  for  special  taxation. 
The  principle  is  recognized  in  the  English  income  tax  which  im- 
poses a  heavier  tax  on  "unearned"  incomes,  such  as  those  arising 
from  rents  and  investments,  than  upon  "earned"  incomes  derived 
from  employment  and  the  conduct  of  business.  Most  economists 
and  the  great  majority  of  the  people  agree  with  Mill  that  while  the 
taxing  away  of  all  the  value  which  society  has  allowed  to  accrue 
to  landowners  would  violate  property  rights  which  society  is 
bound  to  respect,  nevertheless  there  can  be  "no  objection  to 


80  Report  of  Nebraska  Tax  Commission 

declaring  that  the  future  increment  of  rent  should  be  liable  to 
special  taxation;  in  doing  which  all  injustice  to  the  landlords 
would  be  obviated,  if  the  present  market  price  of  their  land 
were  secured  to  them  since  that  includes  the  present  value  of  all 
future  expectations."  Principles  of  Political  Economy,  Bk. 
V.  Ch.  II. 

The  taxation  of  the  future  increase  in  the  value  of  land 
rests,  therefore,  on  a  sound  theoretical  basis.  It  appeals  to  the 
average  man  as  just,  and  there  can  be  little  doubt  that  from  the 
practical  side  it  will  in  time  justify  itself  as  a  wise  fiscal  policy 
We  make  no  recommendation  for  present  legislative  action  upon 
this  phase  of  real  estate  taxation  but  content  ourselves  with 
pointing  out  that  here  is  a  great  source  of  private  gain  upon 
which  from  its  character  society  as  a  whole  has  peculiar  claims, 
and  with  commending  the  subject  to  the  consideration  of  the 
legislature  and  the  people  of  the  commonwealth. 


Mortgage  Tax  Law  81 

CHAPTER  V 

THE  MORTGAGE  TAX  LAW 

Provisions  of  the  Law. — Prior  to  1911  mortgages  were 
treated  as  personal  property  and  assessed,  when  listed  at  all,  at 
the  domicile  of  the  owner.  In  that  year  a  new  departure  was 
inaugurated  by  the  so-called  Smith  Mortgage  Tax  Law,  providing 
by  a  round-about  method  for  the  practical  exemption  of  mortgages 
secured  by  real  estate  within  the  commonwealth.  The  act  is 
entitled  "An  Act  to  Provide  for  the  Taxation  of  Mortgages  of 
Real  Property  and  to  Prevent  Double  Taxation  on  Encumbered 
Property  in  the  State."  The  act  declares  a  mortgage  on  real 
estate  in  this  state  an  interest  in  the  real  property  for  purposes 
of  taxation.  The  amount  and  value  of  the  mortgage  is  required 
to  be  assessed  to  the  mortgagee  or  his  assigns  and  the  taxes 
levied  thereon  are  made  a  lien  on  the  mortgage  interest;  while 
the  excess  value  of  the  real  estate  above  the  mortgage  is  assessable 
to  the  owner  of  the  premises.  But  the  mortgagor  or  the  mort- 
gagee may  either  assume  the  payment  of  taxes  on  the  interest  of 
the  other.  The  two  interests  are  to  be  assessed  separately  except 
where  the  mortgagor  agrees  to  pay  the  taxes  on  both  interests. 
In  such  cases  the  assessor  "shall  not  enter  said  mortgage  for 
separate  assessment  and  taxation,  but  both  interests  shall  be 
assessed  and  taxed  to  the  mortgagor  or  owner  of  the  property 
mortgaged."  The  act  was  not  to  apply  to  mortgages  filed  before 
July  1,  1911,  nor  "to  corporations,  the  property  of  which  is  now 
exempt  from  taxation." 

The  Operation  of  the  Law. — The  arguments  advanced  in 
favor  of  the  law  at  the  time  of  its  passage  and  more  recently  for 
its  continuance  were  (1)  that  it  would  give  relief  from  "double 
taxation"  to  a  certain  class  of  property;  (2)  that  it  would  make 
it  possible  for  residents  to  invest  savings  in  home  mortgages; 
and  (3)  that  it  would  reduce  the  interest  rate  on  real  estate 
loans.  It  is  probable  that  the  last  consideration  carried  the 
greatest  weight  with  the  members  of  the  legislature. 

The  first  purpose  has  of  course  in  a  round-about  way  been 
accomplished.  The  way  lies  open  for  the  practical  exemption  of 


82  Report  of  Nebraska  Tax  Commission 

real  estate  mortgages  secured  in  the  state,  and  in  time  this  would 
be  completely  accomplished  under  the  law.  We  have  no  exact 
data  bearing  on  the  second  argument  for  the  law,  but  an  investi- 
gation made  by  Representative  I.  H.  Hatfield  in  1913  sh'owed 
that  for  Lancaster  county  the  "  home-ownership "  of  Nebraska 
mortgages  had  to  all  appearances  very  considerably  increased. 

1.     Effect  of  Mortgage  Exemption  on  the  Interest  Rate. 

—This  has  been  a  matter  of  considerable  dispute.  We  have 
secured  from  twelve  of  the  counties,  through  the  kindness  of  the 
registers  of  deeds,  a  record  of  all  the  real  estate  mortgages  filed 
in  those  counties,  except  those  of  building  and  loan  associations, 
during  the  year  ending  June  30,  1911,  and  the  year  next  following. 
For  this  first  year  under  the  new  law  we  asked  to  have  the  mort- 
gages listed  separately  according  as  they  contained  the  "  Tax- 
Clause"  or  did  not.  The  returns  cover  almost  four  thousand 
mortgages.  The  results  of  the  inquiry  are  presented  in  the  table 
and  the  summary  below.  (The  detailed  tables  by  counties  are 
printed  in  the  Appendix  B). 


Effect  on  Rate  of  Interest 


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84  Report  of  Nebraska  Tax  Commission 

The  results  will  be  more  clearly  seen  in  the  following  sum- 
mary: 

Loans  Interest         Average 

Rate 

Year  June  30,  1911 $4,117,942.71  $256,337.13           6.22 

Year  June  30,  1912: 

With  tax  clause. ........  4,280,011.83  255,496.76           5.96 

Without  tax  clause 1,383,074.36  87,797.89           6.36 

Total  with  and  without 

tax  clause 5,663,086.19  343,294.65           6.06 

The  tables  show  that  in  two  counties  the  average  rate  on 
mortgages  having  the  tax  clause  was  the  same  during  the  first 
year  under  the  law  as  it  was  for  the  year  ending  June  30,  1911. 
In  three  counties  it  was  higher;  in  the  other  seven  the  rate 
was  lower.  For  all  counties  the  average  rate  was  6.22  per  cent 
in  1911;  on  mortgages  with  the  tax  clause  it  was  in  1912  5. 96  per 
cent  and  on  those  without  the  tax  clause  6.36  per  cent.  Com- 
paring all  mortgages  listed  for  the  two  years  the  average  rate  was 
for  the  year  ending  June  30,  1911,  6.22  per  cent,  and  for  the  first 
year  under  the  law  6.06  per  cent. 

It  is  therefore  not  correct  to  say  that  the  mortgage  rate 
rose  under  this  law,  though  in  view  of  the  general  stiffening  of 
the  interest  rate  throughout  the  country  in  1911  and  1912  a  rise 
might  well  have  occurred.  Certainly  there  was  no  ground  for 
expecting  any  considerable  fall  in  the  interest  rate  as. a  conse- 
quence of  exempting  mortgages.  The  rate  on  that  class  of  paper 
had  already  been  determined  before  the  law  went  into  force,  on 
the  assumption  of  practical  exemption.  The  great  mass  of 
mortgage  loans  is  owned  by  banks,  trust  and  insurance  com- 
panies, and  are  not  directly  taxable  as  such ;  or  they  are  made  for 
export  to  jurisdictions  where  their  ownership  cannot  be  traced. 
Many  cases  could,  of  course,  be  found  where  individuals  had  been 
willing  to  lend  at  the  going  rate  and  yet  pay  the  local  taxes  in 
order  to  have  their  security  in  sight;  but  the  number  of  loans 
made  under  such  circumstances  must  have  been  so  few  compared 
with  those  not  intended  for  taxation  as  to  have  had  little  or  no 
effect  on  the  rate  of  interest.  There  should,  therefore,  have  been 
no  disappointment  when  it  was  found  that  as  a  rule  the  mortgagor 
assumed  the  tax  and  got  but  a  slight  reduction  in  the  interest 
rate.  The  mortgagor  has  not  been  injured  directly  by^the^law 


Effect  on  Volume  Listed  85 

and  its  provision  permitting  him  to  shoulder  the  tax;  for  his  land 
was  before  1911  assessed  to  him  and  no  more  than  this  is  assessed 
to  him  now.  Moreover,  he  does  get  his  loan  at  a  slightly  lower 
rate,  apparently  on  account  of  more  local  funds  being  available 
for  real  estate  loans;  and  this  in  spite  of  a  general  advance  in  the 
interest  rate.  Still  if  the  law  was  not  passed  for  the  purpose 
expressed  in  the  title,  or  rather  as  a  measure  to  relieve  local 
owners  from  the  necessity  of  concealing  their  property  in  order 
to  escape  double  taxation,  it  would  seem  hardly  to  have  been 
justified. 

2.  Effect  on  the  Volume  of  Mortgages  Listed. — The 
effect  of  the  law  on  the  volume  of  mortgages  returned  for  taxa- 
tion is  seen  in  the  following  table: 

Assessed  Value  (One-fifth  of  Actual  Value)  of  Notes  Secured 
by  Mortgage  on  the  Grand  Assessment  Roll 

1904 $4,501,215       1912. $6,397,155 

1909 6,446,660       1913. . 4,769,780 

1910 7,249,134       1914 3,221,007 

1911.... 7,964,167 

This  shows  a  falling  off  of  this  item  in  the  assessment  of 
$4,743,160,  or  almost  60  per  cent  since  1911.  The  withdrawal 
of  this  amount  from  taxation  involves  of  course  an  increase  of 
taxes  upon  those  who  hold  other  kinds  of  property.  There  is  no 
way  of  knowing  how  much  of  this  item  is  represented  by  mort- 
gages on  land  outside  the  state,  owned  by  residents  of  the  state. 

Effect  on  the  Banks. — One  result  of  the  act  seems  to  have 
been  quite  unforeseen.  We  refer  to  the  way  the  act  has  been 
made  to  bear  on  the  taxation  of  banks. 

While  the  assessment  for  1912  was  in  progress  the  question 
was  raised  as  to  whether  Nebraska  mortgages  held  by  banks 
were  assessable  to  the  banks.  It  was  promptly  ruled  by  the 
State  Board  of  Equalization  and  Assessment  that  they  were  not; 
that  so  far  as  they  represented  the  investment  of  deposits  they 
should  not  be  assessed  to  the  banks  since  deposits  were  by  L.w 
assessed  to  the  depositors;  that  so  far  as  they  represented  in- 
vestment of  capital  they  should  not  be  assessed,  since  their  value 
was  already  reflected  in  the  value  of  the  bank  stock,  the  taxation 
of  which  was  provided  for  by  a  section  not  repealed  or  in  any  way 
modified  by  the  act  of  1911, 


86 


Report  of  Nebraska  Tax  Commission 


Some  of  the  banks  were  not  content  with  the  view  that 
they  were  not  affected  by  the  law.  So  far  as  known  they  did  not 
return  any  mortgages  without  the  tax-clause  for  separate  assess- 
ment and  taxation.  But  because  of  the  generous  provision  of 
the  section  dealing  with  the  assessment  of  banks,  which  allows 
them  in  determining  the  taxable  value  of  their  capital  stock  to 
deduct  the  value  of  their  "real  estate  and  other  tangible  property 
assessed  separately/'  and  the  broad  declaration  in  the  act  of 
1911  that  "a  mortgage  on  real  estate  in  this  state  is  hereby 
declared  to  be  an  interest  in  real  estate  for  purposes  of  assessment 
and  taxation,"  the  banks  have  established  their  right  to  deduct 
the  value  of  their  mortgages  secured  in  this  state  from  the  value 
of  their  capital  stock.  First  Trust  Company  of  Lincoln  v.  Lan- 
caster County,  93  Neb.,  792. 

The  effect  of  this  ruling  on  the  value  of  bank  stock  returned 
for  taxation  is  seen  in  the  following  table : 


The   Assessed   Value    (One-fifth   of   the   Actual    Value)    of 

Bank  Stock,  and  the  Capital  Surplus  and  Undivided 

Profits  of  State  Banks  at  the  Call  Date  Nearest  the 

Assessment   Date  in  Each  Year 


Year 

Assessed  Value 
State  Bank 
Stock 

Capital  Stock 
Surplus  and  Undivided 
Profits 

Bank  Building, 
Furniture  and  Fixtures 
and  Other 
Real  Estate 

1910 

$2,618,140 

$16,848,589    (May  11) 

$2,585,832 

1911      

2,681,827 

17,215,102    (Feb.  17) 

2,759,420 

1912  
1913  

2,811,797 
2,908,034 

18,119,527    (Feb.  16) 
19,219,965    (Feb.  15) 

2,909,482 
3,225,216 

1914  

2,612,748 

20,317,860    (May  16) 

3,546,045 

Deductions  from  Capital  Stock. — Reports  were  received 
from  seventy  counties  in  response  to  our  inquiry  as  to  the  amount 
of  deductions  made  from  the  value  of  the  capital  stock  of  banks. 
We  made  no  attempt  to  ascertain  how  much  was  deducted  from 
the  capital  stock  of  other  corporations  assessed  on  a  method  ana- 
logous to  that  for  assessing  banks,  though  it  is  known  that  some 
such  deductions  were  made.  Of  the  70  counties  reporting,  41 
reported  deductions  in  one  or  both  years,  and  29  reported  "no 
deductions"  for  the  year  or  years  for  which  the  return  was  made 


Deductions  From  Bank  Stock 


87 


Of  the  20  counties  not  reporting  most  probably  had  no  deduc- 
tions to  report.  Omitting  these  counties  the  results  are  shown 
in  the  table  which  follows : 

Table  Showing  by  Counties  the  Actual  Value  of  Mortgagee 

Deducted  from  the  Capital  Stock  of  Banks  Under 

the  Mortgage  Tax  Law,   1913  and  1914 


County 

1913 

1914 

County 

1913 

1914 

Adams   

$47,765 

$48,637 

Keya  Paha.  .  . 

$38,640 

Antelope  

None 

None 

Kimball  

None 

None 

Boone 

230,440 

79,152 

Lancaster  ...    . 

500,168 

$714,568 

Box  Butte  
Brown  
Buffalo  

None 
None 
None 

34,922 
10,185 

Logan  
Madison  
McPherson.  .  . 

None 
83,210 
None 

None 
4,870 

Cass 

None 

Merrick 

None 

None 

Cedar 

None 

None 

Nance        .    .  . 

None 

11,650 

Chase  
Cherry  
Cheyenne 

None 
2,025 
None 

17,889 
None 

Nemaha  
Nuckolls  
Otoe 

55,815 
75,000 
None 

84,977 
6,500 
None 

Clay  

77,317 

Pawnee  

None 

34,602 

Coif  ax 

157,575 

Perkins     .  . 

None 

None 

Cuming      ...    . 

None 

None 

Phelps  

None 

15,000 

Custer    

None 

79,025 

Pierce  

None 

None 

Dawes  

None 

None 

Platte.  . 

None 

Dawson  ....... 

None 

None 

Polk  

None 

295 

Dixon  
Dodge  
Douglas 

None 
923,658 

61,074 
1  313,448 

Red  Willow  .  .  . 
Richardson  .  .  . 
Saline 

None 
85,625 
113,360 

None 
297,134 
240,789 

Dundy  

None 

None 

Sarpy.  . 

None 

45,480 

Filmore.  ."  

None 

None 

Saunders 

None 

293,701 

Franklin  

74,678 

70,482 

Scott's  Bluff 

None 

None 

Frontier 

51,720 

47,185 

Seward 

42,200 

•None 

Furnas  
Gage  

None 
180,725 

7,100 
308,392 

Sheridan  
Sherman  ..... 

None 
26,345 

115,507 
30,500 

Gosper  
Grant  

None 
None 

14,445 
None 

Stanton  
Thayer  

None 
None 

None 
None 

Greeley 

2,384 

8,611 

Thomas 

None 

None 

Hall  
Hamilton.  
Harlan  

None 
None 
51,283 

None 

38,867 
76,746 

Thurston.  . 
Valley  
Washington 

None 
7,000 
None 

None 
68,812 
None 

Holt 

None 

36,200 

Wayne 

None 

None 

Hooker  

3,768 

None 

Webster 

52,000 

Howard  

None 

Wheeler.  . 

None 

1,600 

Jefferson  
Johnson 

59,020 
iq  040 

178,708 
107  48fi 

York  

86,130 

372,721 

Kearney 

None 

TOTAL 

$2,931,996 

$5,020,097 

Keith  

13,520 

13,520 

88  Report  of  Nebraska  Tax  Commission 

Conclusions    and     Recommendations. — Three    courses 
may  be  followed  with  respect  to  this  law: 

1.     Repeal   it    Unconditionally.     This   was   strongly   urged 
in  the  1913  session  of  the  legislature.     A  bill  for  that  purpose 
passed  the  House  by  a  vote  of  54  yeas  to  37  nays,  but  failed  in 
the  Senate  by  a  vote  of  20  to  6.    If  this  plan  is  followed  it  would 
make  little  if  any  difference  in  case  the  tax  amendment  is  adopted 
and  the  legislature  enacts  an  income  tax  law.    All  kinds  of  securi- 
ties would  be  exempt  under  such  a  plan.    We  can  see  no  serious 
objection  to  repeal  in  case  the  legislature  chooses  the  classified 
property  tax  as  a  means  of  dealing  with  intangibles.    There  is 
indeed  good  reason  for  treating  domestic  and  foreign  mortgages 
in  the  same  way.    But  if  the  amendment  fails  we  believe  it  would 
be  a  mistake,  a  backward  step,  to  repeal  the  law.    All  the  reasons 
for  its  enactment  in  1911  still  exist.    Repeal  would  mean  a  check 
to  the  free  investment  of  home  capital  in  real  estate  mortgages 
and  probably  a  slight  advance  in  the  interest  rate.    It  would  lead 
to  the  concealment  of  the  ownership  of  about  the  only  kind  of 
intangibles  a  conscientious  taxpayer  can  now  afford  to  own. 
It  would  moreover  give  a  sense  of  shiftiness  in  dealing  with  such 
matters  that  is  wholly  undesirable.    While  it  would  lead  to  an 
increase  of  "property"  on  the  assessment  rolls  and  thus  reduce 
the  rate  on  other  classes,  it  would,  as  before  the  passage  of  the 
law,  impose  an  unfair  burden  upon  those  owners  of  mortgages 
who  will  not  or  cannot  take  advantage  of  the  numerous  devices 
for  escaping  the  tax. 

2.  Leave  the  Law  as  it  Stands.     This  we  do  not  approve 
As  now  interpreted  it  does  not  meet  the  reasonable  expectation, 
of  those  responsible  for  its  passage.    This  suggests  as  the  proper 
course  the  third  alternative. 

3.  Amend  the  Law  so  as  to  Conform  to  its  Original  Purpose. 
Among  the  measures   introduced   at   the  last  session   dealing 
with  this  statute  was  a  proposal  to  amend  the  law  so  as  to  for- 
bid the  mortgagor  to  assume  the  tax  on  the  mortgage  inter- 
est.   On  the  face  of  it  this  seems  like  a  fair  adjustment  as  be- 
tween the  parties  concerned.     But  it  is  a  cumbersome  method 
to  follow.    The  mortgagee  would  have  to  swear  off  payments 
as  they  are  made  in  order  to  reduce  the  base  for  his  tax  and 


Recommendations  89 

corresponding  additions  would  have  to  be  made  year  by  year 
to  the  mortgagor's  interest.  But  of  more  consequence,  such 
an  amendment  would  not  have  the  desired  effect  of  making  the 
owner  of  the  mortgage  pay  the  tax.  The  interest  rate  cannot  be 
changed  by  an  act  of  the  legislature.  There  seems  to  be  a  feeling 
abroad  that  if  the  exemption  of  mortgages  in  1911  did  not  greatly 
reduce  the  interest  rate,  the  enforced  requirement  that  the 
mortgagee  shall  pay  the  tax  would  not  cause  the  rate  to  rise. 
The  two  conditions  are  quite  different.  We  have  considered 
the  conditions  which  placed  a  limit  upon  the  fall  of  interest  rate 
in  1911.  The  effect  of  the  proposed  change  can  be  foreseen. 
It  is  obvious  that  lenders  who  have  a  choice  between  placing 
their  loans  in  a  state  where  a  tax  must  be  paid  and  states  where 
such  tax  is  not  required,  will  naturally  choose  the  latter.  The 
only  condition  on  which  foreign  money  would  come  in  for  invest- 
ment would  be  that  of  an  interest  rate  enough  higher  than  the 
normal  return  to  pay  the  tax.  A  careful  study  of  the  operation 
of  such  a  provision  in  California  showed  a  few  years  ago  that 
the  lenders  secured  something  above  such  a  margin.  Resident 
investors  desiring  to  avoid  taxation  would  buy  foreign  mort- 
gages, easily  concealed,  unless  attracted  to  home  mortgages  by 
a  higher  rate  of  interest.  The  few  investors  willing  to  loan  only 
on  security  within  sight  would  have  but  slight  effect  upon  the 
rate.  The  conclusion  seems  inevitable  that  the  tax  would  be 
shifted  to  the  borrower  and  paid  in  a  higher  rate  of  interest. 

Our  recommendation  is  simply  for  such  amendments  to  the 
revenue  law  as  will  deprive  the  banks  and  other  corporations 
taxed  on  the  basis  of  their  capital  stock  the  privilege  they  now 
enjoy  of  deducting  mortgages  from  the  value  of  their  shares. 
The  provisions  for  deductions  under  Section  56  of  the  Revenue 
Act  were  already  too  generous  before  1911.  Banks  are  allowed 
to  deduct  the  assessed  value  of  all  real  estate  or  other  tangible 
property  owned  by  them  and  assessed  separately.  We  believe 
this  section  should  be  amended  so  as  to  limit  the  deductions  to 
the  assessed  value  of  the  banking  house,  if  owned,  and  the  furni- 
ture and  fixtures.  This  is  the  Wisconsin  provision,  except  that 
there  the  banks  are  not  allowed  to  deduct  furniture  and  fixtures. 
In  New  York  banks  are  taxed  on  the  basis  of  capital,  surplus  and 
undivided  profits,  and  no  deduction  is  allowed  for  any  real  estate 
owned.  The  item  of  real  estate  other  than  banking  house  for  the 


90  Report  of  Nebraska  Tax  Commission 

Nebraska  state  banks,  October  21,  1913,  was  $352,434.21.  The 
national  banks  of  the  state  on  the  same  date  had  "other  real  estate 
and  mortgages  owned"  amounting  to  $795,464.48.  How  much 
of  this  was  real  estate  we  have  no  means  of  knowing.  This 
amendment  would  effectually  dispose  of  the  claim  of  banks  to 
deduct  mortgages  under  the  Smith  Law  on  the  ground  that  they 
are  real  estate  within  the  meaning  of  that  statute. 


The  Railroads  91 

CHAPTER  VI 

THE  TAXATION  OF  CORPORATIONS 

I.      THE  PUBLIC  SERVICE  CORPORATIONS 
1.     The  Railroads 

The  railroad  property  of  the  state,  next  to  real  estate,  con- 
stitutes the  largest  item  in  the  grand  assessment  roll.  The 
relative  importance  of  this  property  since  1867  is  shown  in  the 
table  on  p.  .  At  present  it  represents  11.86  per  cent  of  the  total 
valuation. 

The  railroad  property,  except  that  situated  outside  the  right- 
of-way,  is  assessed  by  the  State  Board  of  Equalization  and  Assess- 
ment and  the  valuation  pro-rated  to  the  counties  and  other  civil 
divisions  on  the  basis  of  "the  number  of  miles  of  main  track  or 
line."  The  law  has  been  construed  to  give  the  Board  the  right 
to  classify  the  mileage  of  a  system  as  "main  line"  and  "branches" 
and  to  ascribe  different  values  per  mile  of  road  accordingly. 
Thus  in  1912  the  main  line  of  the  Burlington  from  Plattsmouth 
to  the  Colorado  state  line  was  valued  at  $80,000  per  mile  (assessed 
at  $16,000  per  mile);  the  main  line  from  Rulo  to  Oxford  was 
valued  at  $52,500  per  mile;  while  the  branch  from  South  Sioux 
City  to  O'Neill  at  $25,000;  the  high  line  from  Holdrege  via 
Curtis  to  the  state  line  at  $35,000.  The  main  line  of  the  Union 
Pacific  was  valued  at  $107,500  per  mile  for  the  whole  distance 
across  the  state  and  most  of  its  branches  at  $46,000,  and  so  on. 
It  will  be  seen  that  this  method  of  apportioning  the  value  of  the 
railroads  is  highly  advantageous  to  those  counties  which  have 
relatively  little  terminal  property,  such  as  station  grounds  and 
switch  yards,  and  where  land  values  are  low,  since  the  values  of 
terminal  property  and  the  right-of-way  through  high  priced 
lands  are  spread  out  to  the  less  favored  parts  of  the  state. 

Terminal  Assessments. — This  situation  was  recognized  in 
an  act  of  1907  providing  for  "Terminal  Taxation"  so-called. 
This  act  provides  for  a  separate  assessment  of  the  railway  property 
within  the  corporate  limits  of  cities  and  villages,  upon  which 
to  base  municipal  taxes  only.  The  local  assessors  are  required 


92 


Report  of  Nebraska  Tax  Commission 


to  find  the  value  of  the  right-of-way  and  the  property  situated 
thereon;  the  State  Board  finds  the  value  per  mile  of  the  "in- 
tangible property  and  rolling  stock,"  and  this  added  to  the  local 
assessment  gives  the  basis  for  municipal  taxes.  By  this  method 
the  municipalities  secure  a  substantial  increase  of  taxes  without 
depriving  the  outlying  districts  of  their  advantage  pointed  out 
above. 

The  railroads  are  also  subject  to  the  occupation  tax  paid 
into  the  state  treasury.  From  this  source  about  $13,000  was 
derived  in  1914. 

Yield  of  Railroad  Taxes. — Taxes  paid  by  the  railroads 
in  the  state  since  1900  as  given  in  the  reports  of  the  Interstate 
Commerce  Commission  are  shown  in  the  table  below.  For 
purposes  of  comparison  the  taxes  per  mile  of  line  for  Nebraska 
and  the  neighboring  states  of  Kansas  and  Iowa  are  given: 

Railroad  Taxes  Paid  in  Nebraska  1900-1914 


Total  Tavp<? 

Taxes 

Taxes  pe 
of  Lin 

r  Mile 

e  in 

of  Line 

Kansas 

Iowa 

1900  . 

$1,125,121 

$198 

$255 

$159 

1901  

1,147,159 

200 

252 

164 

1902  

1,168,622 

204 

251 

171 

1903 

1,152,523 

199 

251 

182 

1904 

1,288,953 

223 

277 

208 

1905  ...  . 

1,296,686 

224 

272 

212 

1906  

1,389,174 

240 

305 

217 

1907  
1908  

2,546,264 
1,858,096 

429 
309 

296 
343 

234 
230 

1909 

1,873,305 

331 

309 

242 

1910 

2,030,864 

335 

334 

253 

1911  

2,182,954 

360 

316 

269 

1912  
1913 

2,280,43s1 
2,302,536' 

368 
370 

It  will  be  seen  from  this  table  and  the  one  on  page  (22) 
that  the  railroad  taxes  have  not  increased  as  rapidly  as  the  taxes 
on  general  property.  This  is  due  in  part  to  the  fact  that  the 
railway  net  itself  has  in  recent  years  made  no  great  growth.  The 
increase  in  taxes  per  mile  of  line,  however,  has  been  substantial. 
Since  1903,  the  taxes  per  mile  of  line  have  increased  $171,  or  85 

*The  figures  for  1912  and  1913  are  from  the  Sixth  Annual  Report  of  the 
State  Railway  Commission  and  are  for  the  seven  large  companies  only. 


The  Railroad  Taxes 


93 


per  cent.  Since  1905  the  increase  has  been  $146  per  mile,  or  65 
per  cent.  Compared  with  the  railroad  taxes  paid  in  neighboring 
states  those  in  Nebraska  appear  to  be  adequate.  They  exceed 
those  of  Iowa  throughout  the  period.  This  does  not  imply  that 
they  are  too  high  here,  for  there  has  been  much  complaint  that 
in  Iowa  railroad  property  does  not  bear  its  just  share  of  the  tax 
burden.  During  the  early  part  of  the  period  covered  by  the  table 
Nebraska  roads  were  taxed  considerably  below  those  in  Kansas 
but  since  1909  the  conditions  have  been  reversed.  The  taxes 
for  all  the  roads  of  the  United  States  for  the  fiscal  year  1911  were 
$442  per  mile.  In  that  year  the  roads  of  the  state  paid  $360. 

Another  way  of  comparing  the  yield  of  these  taxes  is  to 
reduce  them  to  a  gross  earnings  basis.  We  give  in  the  tables 
below,  for  the  fiscal  years  1912  and  1913,  and  for  the  calendar  year 
1913,  the  gross  earnings  an  Nebraska,  taxes  paid,  the  percentage 
these  taxes  were  of  the  gross  earnings;  and  for  comparative 
purposes  what  the  taxes  would  be  at  4  per  cent  and  at  5  per  cent 
for  the  seven  largest  railroads  in  the  state : 

TABLE  I 

Railroad   Taxes   in   Nebraska   for   the   Year   Ending  June 

30,  1912 


Gross 
Earnings 

Taxes 
Paid  Year 

Tnno  30 

Taxes 
Per  cent. 

Ta: 
on  Gross 

tes 
Earnings 

Nebraska 

1912 

Earnings 

At  4% 

At  5% 

Union  Pacific.  . 
C.,  B.  &Q.. 
C.  &N.  W  
C.,  St.  P.,  M.  &0. 
C.,  R.  I.  &P  
Mo.  Pac 

$17,554,540 
20,892,008 
6,677,786 
1,959,158 
1,537,778 
1,527,077 

$695,215 
962,920 
307,718 
111,369 
81,934 
93,464 

3.96 
4.61 
4.61 
5.68 
5.33 
6  12 

$702,182 
835,680 
267,111 
78,366 
61,511 
61  083 

$877,727 
1,044,600 
333,889 
97,958 
76,889 
76,354 

St.  Jos.  &  G.I  

458,349 

27,815 

6.07 

18,334 

22,917 

Total  

$50,606,696 

$2,280,435 

4.51 

$2,024,267 

$2,530,334 

94 


Report  of  Nebraska  Tax  Commission 


TABLE  II 

Railroad    Taxes    in    Nebraska    for    the  Year  Ending  June 

30,  1913 


Name  of  Road 

Gross 

Earnings 
in 
Nebraska 

Taxes 
Paid  Year 
June  30, 
1913 

Taxes 
Per  cent, 
of  Gross 
Earnings 

Taxes 
on  Gross  Earnings 

At  4% 

At  5% 

Union  Pacific  .  . 
C.,  B.  &Q  
C.  &N.  W.. 
C.,  St.  P.,  M.  &O. 
C.,  R.  I.  &  P 

$19,391,754 
20,942,454 
6,532,333 
1,975,988 
1,519,920 
1,728,063 
455,072 

$750,607 
963,763 
298,244 
100,575 
73,659 
90,643 
25,045 

3.87 
4.60 
4.57 
5.09 
4.85 
5.24 
5.50 

$775,670 
837,698 
261,293 
79,040 
60,797 
69,123 
18,203 

$969,588 
1,047,123 
326,617 
98,799 
75,996 
86,403 
22,754 

Mo.  Pac..  . 

St.  Jos.  &  G.  I  

Total  

$52,545,584 

$2,302,536 

4.38 

$2,101,824 

$2,627,280 

TABLE  III 

Railroad    Taxes    in    Nebraska    Exclusive    of    Corporation 
Occupation    Fee   and    Taxes   en    Property    Lo- 
cally Assessed  for  the  Year  Ending 
December  31,    1913 


Name  of  Road 

Gross 
Earnings 
in 
Nebraska 

Taxes 
Paid  for 
1913 

Taxes 
Per  cent, 
of  Gross 
Earnings 

Taxes 
on  Gross  Earnings 

At  4% 

At  5% 

Union  Pacific  
C.,  B.  &  Q.. 
C.  &N.  W.. 
C.,  St.  P.,  M.  &O. 
C.,  R.  I.  &P... 
Mo.  Pac  
St.  Jos.  &  G.  I  

$19,648,066 
21,032,288 
6,895,766 
2,040,125 
1,485,156 
1,728,063 
449,364 

$814,157 
1,055,580 
333,867 
112,918 
77,214 
107,656 
28,437 

4.14 
5.02 
4.84 
5.53 
5.20 
6.23 
6.33 

$785,923 
841,292 
275,831 
81,605 
59,406 
69,123 
17,975 

$982,403 
1,051,614 
344,788 
102,006 
74,258 
86,403 
22,468 

Total  

$53,278,828 

$2,529,829 

4.75 

$2,131,155 

$2,663,940 

The  tables  show  considerable  inequalities  between  the 
stronger  and  the  weaker  roads  under  our  ad  valorem  system. 
The  average  rate  based  on  gross  earnings  is  higher  than  the 
average  for  the  roads  of  the  United  States.  The  latest  year 
for  which  official  figures  are  available  is  the  fiscal  year  1911 
when  the  railroads  of  the  United  States  paid  taxes  amounting  to 
$108,309,512,  equivalent  to  3.88  per  cent  of  their  gross  earnings. 
The  estimated  equivalent  for  1912  was  4.21  per  cent  and  for 
1913,  4.14  per  cent.  It  will  thus  be  seen  that  the  railroad  taxes  in 


Railroad  and  Real  Estate  Taxes  Compared  95 

Nebraska  are  slightly  above  the  average  for  the  country  as  a 
whole  when  reduced  to  the  basis  of  earnings. 

Does  Railroad  Property  Bear  a  "Fair  Share"  of  the  Tax 
Burden? — The  answer  to  this  question  will  depend  on  one's 
view  of  what  constitutes  a  "fair  share."  If  by  it  is  meant  a  share 
proportionate  to  the  burden  borne  by  other  classes  of  property, 
we  believe  it  does.  Comparison  can  be  best  made  for  1911,  the 
latest  year  for  which  we  have  the  valuation  made  by  the  engineer- 
ing department  of  the  State  Railway  Commission.  The  engineers 
found  the  present  value  of  the  seven  large  roads  of  the  state  to  be 
$273,683,779.  The  State  Board  found  the  actual  value  of  these 
roads  on  May  3  of  that  year  to  be  $272,522,072.  But  this  in- 
cluded the  "franchise"  or  intangible  value  as  well  as  the  value  of 
the  physical  property.  The  Board  in  making  the  assessment  for 
terminal  taxation  is  required  to  find  the  value  of  "intangible 
property  and  rolling  stock  for  each  road.  These  two  items  for 
the  seven  roads  amounted  to  $130,322,550.  The  rolling  stock 
as  valued  by  the  engineering  department  for  that  year  amounted 
to  $26,599,487,  leaving  as  the  value  of  intangible  property 
$103,723,063.  The  true  value  can  thus  be  found  by  adding  the 
value  of  the  physical  property  as  found  by  the  engineers  and  the 
intangible  property  as  found  by  the  Board.  This  gives  a  true 
value  of  $377,406,842.  The  Board  therefore  assessed  the  rail- 
roads at  72  per  cent  of  the  true  value  thus  computed.  •  We  have 
no  means  of  comparing  this  with  the  assessment  of  all  kinds  of 
property;  but  accepting  the  estimates  of  the  true  value  of  lands 
made  by  Mr.  Reed  of  the  Railway  Commission  for  1913  it  seems 
that  this  important  class  of  property  was  assessed  on  the  average 
at  73  per  cent  of  its  true  value  (p.64).  It  appears,  therefore, 
that  the  railroads  are  being  assessed  at  a  percentage  of  their 
true  value  very  close  to  that  of  the  lands  of  the  state. 

Another  comparison  can  be  made.  It  is  sometimes  pointed 
out  that  a  large  part  of  the  property  of  railroads  lies  in  the  open 
country  where  the  tax  rates  are  low  and  thus  they  are  taxed 
below  the  average  rate.  Without  passing  judgment  on  this 
course  of  reasoning  the  following  facts  may  be  adduced:  The 
average  rate  of  ad  valorem  taxes  as  found  by  the  State  Board  in 
1913  was  47.25  mills.  If  this  rate  had  been  apj  ied  to  the  assessed 
valuation  of  the  seven  large  companies  ($55,450,780)  it  would 
have  produced  $2,620,049  in  taxes.  The  taxes  paid  by  these 


96  Report  of  Nebraska  Tax  Commission 

seven  companies,  exclusive  of  occupation  taxes,  and  taxes  on  lo- 
cally assessed  property  amounted  to  $2,530,011.  It  will  thus  be 
seen  that  the  railroads  pay  very  nearly  the  average  rate  of  taxes 
on  a  valuation  which  is  probably  as  near  the  true  value  as  that  of 
the  general  property  of  the  state. 

The  Test  of  Profits. — Another  method  of  comparing  the 
railroad  taxes  with  those  on  other  property  is  to  reduce  such 
taxes  to  an  income  basis.  The  data  for  such  a  comparison  can  be 
obtained  for  the  railroads  and  other  public  service  corporations, 
but  for  the  most  important  industry  in  the  state  and  the  one 
with  which  comparison  is  most  desirable — the  agricultural  in- 
dustry, only  fragmentary  information  is  available.  It  appears 
very  probable,  however,  that  if  the  facts  could  be  learned  they 
would  show  that  a  larger  part  of  the  net  revenue  from  the  agricul- 
tural industry  is  taken  for  taxes  than  is  taken  from  the  net  earn- 
ings of  the  railroad  industry  as  a  whole.  From  the  nature  of 
the  two  industries  this  might  normally  be  expected,  for  on  the 
whole  investments  in  real  estate  are  looked  upon  as  among  the 
safest  of  investments,  while  railroad  investments  have  long  been 
regarded  as  more  precarious  especially  for  the  small  investor. 
Under  such  conditions  a  lower  rate  of  return  for  land  owners, 
and  it  may  also  be  said  for  the  operation  of  land,  would  normally 
be  expected.  No  adequate  means,  however,  are  at  present 
available  for  such  a  comparison. 

Distribution  of  the  Railroad  Taxes. — The  most  pressing 
problem  in  connection  with  the  taxation  of  railroads  relates  to 
their  distribution.  The  present  plan  is  based  on  the  generally 
accepted  rule  that  tangible  property  both  real  and  personal  is 
taxable  at  its  situs.  The  value  of  the  railroads  is  localized  in 
the  taxing  districts  through  which  they  run,  just  as  the  value 
of  real  estate,  factories,  or  stocks  of  goods  are  localized.  Now 
this  method  applied  to  railway  property  gives  some  peculiar 
results.  In  the  first  place  the  railroads  are  assessed  on  the  "unit" 
plan,  i.  e.  the  value  of  the  whole  property  is  found,  the  share  of 
this  within  the  state  for  purposes  of  taxation  determined,  this 
share  again  pro-rated  to  the  different  taxing  districts  according 
to  mileage  of  m.ain  track.  Thus  the  Cheyenne  county  part  of  the 
main  line  of  the  Union  Pacific  is  given  the  same  value  per  mile  as 
that  lying  in  Douglas  county.  The  Railway  Commission's 
engineers  found  the  "present  value"  of  the  Union  Pacific  Railway 


Sleeping  Car  Companies  97 

and  structures  thereon  to  be  $657,128  per  mile  for  the  eastern 
section  of  the  road  extending  from  Omaha  to  Lane  Junction; 
from  Grand  Island  to  Columbus  Junction,  $121,864,  and  for  the 
western  section  from  Julesburg  to  the  Wyoming  line  $34,466  per 
mile. 

If  the  only  result  of  the  present  plan  was  to  give  a  dispro- 
portionate value  to  the  less  developed  counties  of  the  state  com- 
paratively little  complaint  would  be  heard.  But  all  the  railroad 
values  are  absorbed  for  purposes  of  taxation  by  the  local  govern- 
ments through  which  they  run.  The  school  districts  are  chiefly 
affected  by  this  plan.  The  outlying  districts  receive  no  railroad 
taxes  and  the  burden  of  maintaining  the  schools  is  a  heavy  one. 
This  is  especially  true  of  districts  in  counties  where  the  value 
of  real  estate  is  low.  Often  districts  having  no  railroad  mileage 
may  have  to  levy  30  or  35  mills  for  schools  while  neighboring 
districts  otherwise  similar  have  to  levy  but  5  or  6  mills.  How  to 
deal  with  the  situation  which  has  thus  grown  up  is  a  difficult 
problem.  Two  principal  methods  of  dealing  with  it  have  been 
proposed : 

1.  Turn  all  the  railroad  taxes  into  the  general  fund  of  the 
state  treasury  thus  relieving  general  property  from  state  taxes  in 
great  part. 

2.  Let  the  state  collect  all  the  railroad  taxes  and  apportion 
them  to  the  school  districts  in  proportion  to  school  population. 

These  methods  are  further  discussed  in  the  chapter  on 
Separation  of  Sources  of  Revenue. 

2.     SLEEPING  CAR  COMPANIES 

History  and  Present  Method  of  Taxation.— Until  1889 
no  provision  was  made  for  taxing  these  companies.  An  act  of 
that  year  provided  for  the  assessment  of  sleeping  cars  not  owned 
by  the  railway  companies  by  the  State  Board  of  Equalization. 
Information  for  making  an  assessment  was  furnished  by  the 
railway  companies.  They  were  required  to  report  the  number 
of  cars  used  over  their  lines,  the  total  number  of  miles  run  by 
such  cars  and  the  number  of  miles  run  within  the  state.  The 
Board  found  the  value  of  the  average  number  of  cars  used, 
and  took  for  the  value  in  this  state  such  a  proportion  thereof 
as  the  mileage  run  in  the  state  bore  to  the  total  mileage  run. 
4 


98  Report  of  Nebraska  Tax  Commission 

This  rule  remained  in  force  till  1903  when  the  present  law  was 
enacted. 

The  sleeping  car  companies  now  report  directly  to  the 
Board.  The  rule  for  apportioning  value  to  the  state  is  changed 
from  a  "miles  run"  basis  to  the  "miles  of  main  track"  basis. 
The  present  rule  is  as  follows:  "The  State  Board  shall  assess 
that  portion  of  such  total  value  which  the  number  of  miles  of 
railroad  main  track  over  which  such  cars  shall  run  were  used 
within  this  state  bears  to  the  total  number  of  miles  of  railroad 
main  track  over  which  such  cars  were  used  everywhere.  Such 
assessment  shall  be  included  in  the  records  and  proceedings  of 
the  Board,  and  shall  be  pro-rated  among  the  several  counties 
traversed  by  railway  having  said  cars  and  shall  be  apportioned 
by  the  county  clerk"  in  the  same  way  railroad  taxes  are  appor- 
tioned. In  addition  to  the  property  tax  thus  provided  for  sleep- 
ing car  companies  they  are  subject  to  the  occupation  tax  on  cor- 
porations. 

Operation  of  the  Law. — The  assessed  (one-fifth  of  the 
actual)  valuation  of  this  class  of  property  since  1900  is  shown  in 
the  following  table : 

1900  $25,559 1907   $115,790 

1901  23,517 1908  117,919 

1902  Not  separated  from  R.  R.  Property 1909  122,364 

1903  Not  separated  from  R.  R.  Property 1910  118,082 

1904  94,710 1911  124,869 

1905  94,710 1912  125,085 

1906  104,965 1913      129,087 

1914      140,445 

The  Pullman  Company  which  controls  the  whole  of  this 
class  of  business  in  the  state  paid  property  taxes  for  the  year 
1913  amounting  to  $5,260.  These  taxes  were  paid  in  sixty-five 
counties  in  amounts  ranging  from  $12.57  in  Washington  county 
to  $253.07  in  Douglas.  In  forty-six  counties  the  tax  was  less 
than  $100.  In  addition  to  the  property  taxes  this  company  paid 
also  an  "annual  fee"  of  $250  under  the  corporation  occupation 
tax  law. 

We  have  no  satisfactory  way  of  determining  whether  these 
payments  constitute  a  fair  tax  or  not.  Wisconsin  with  about 
one-quarter  more  miles  of  railroad  than  Nebraska  makes  an 
assessment  of  this  company  about  double  that  of  Nebraska  and 


Criticism  and  Recommendations  99 

collects  nearly  twice  as  large  a  tax.  Minnesota  with  one-third 
more  miles  of  railroad  collects  twice  as  large  a  tax.  In  both  these 
states  at  least  one  important  road  operates  its  own  sleeping  and 
dining  car  service  which  is  assessed  with  railroad  property. 
Kansas  with  50  per  cent  more  railroad  than  Nebraska  has  col- 
lected an  average  of  $20,000  for  the  past  three  years  from  the 
Pullman  Company,  that  is  a  sum  about  four  times  as  great  as 
the  property  tax  collected  in  this  state. 

Criticism  and  Recommendations. — While  the  com- 
parative figures  given  above  are  by  no  means  conclusive  in  all 
respects  they  give  strong  indications  that  the  present  method  of 
assessment  does  not  secure  to  the  state  a  proper  share  of  the 
company's  property  for  purposes  of  taxation.  The  method  itself 
is  faulty.  In  the  first  place  because  it  attempts  only  to  determine 
the  state's  share  of  the  value  of  cars  used  in  the  state,  thus  ignor- 
ing entirely  the  intangible  or  franchise  value  attaching  to  the  use 
of  such  property.  Secondly,  the  method  of  determining  the 
state's  share  of  the  value  of  the  cars  is  arbitrary  and  has  no  direct 
relation  to  the  amount  of  business  done  in  the  state  or  the  earnings 
therefrom.  If  the  company  is  to  be  taxed  on  the  ad  valorem 
basis  the  law  should  be  so  amended  as  to  give  the  assessing  board 
information  as  to  capital,  earnings,  property  and  car  operations 
such  as  will  enable  it  to  assess  the  intangible  as  well  as  the  tang- 
ible property  employed  in  the  state.  The  Kansas  law  requires 
the  return  of  a  schedule  containing  twenty-five  or  more  items. 
The  rule  for  determining  the  state's  share  of  the  company's  prop- 
erty should  also  be  changed  to  a  mileage  basis.  We  believe  the 
Kansas  rule  in  this  matter  is  more  equitable  than  the  present 
one. 

The  distribution  of  the  tax  should  be  changed.  Every  con- 
sideration as  to  the  nature  of  the  property,  character  of  the 
business,  and  ease  of  administration,  marks  this  as  a  natural 
source  of  state  revenue.  The  tax  is  in  no  sense  a  local  one.  It 
is  pure  fancy  to  localize  Pullman  cars  in  the  counties  through 
which  they  run,  sometimes  without  ever  making  a  stop.  We 
therefore  recommend  that  the  proceeds  of  the  tax  be  turned  into 
the  general  fund  of  the  state  treasury.  This  should  be  done  even 
though  the  ad  valorem,  method  be  retained;  the  reasons  for 
making  it  a  state  tax  will  be  more  imperative  if  the  basis  is  changed 
from  value  to  gross  earnings. 


100  Report  of  Nebraska  Tax  Commission 

The  Gross  Earnings  Tax. — In  case  the  pending  tax 
amendment  is  adopted  we  recommend  the  taxation  of  this  kind  of 
business  on  the  basis  of  gross  earnings.  This  form  of  taxation 
commends  itself  for  all  public  service  corporations  and  particu- 
larly for  car  companies  the  valuation  of  which  presents  some  pecu- 
liar difficulties.  The  judgment  of  the  assessor  neeti  not  be  relied 
upon  under  this  plan  for  the  gross  earnings  of  such  corporations 
are  already  a  matter  of  public  information.  The  tax  adjusts  itself 
to  shifting  conditions  of  business.  When  the  volume  of  business 
is  large  the  tax  increases,  and  when  business  declines  the  tax  is 
automatically  reduced.  It  is  simple,  certain,  fair  to  the  public 
and  to  the  companies,  and  easy  to  administer.  About  a  score  of 
states  use  this  method  of  taxing  car  companies.  Six  of  them 
impose  a  gross  earnings  tax  in  lieu  of  all  other  property  taxes. 
The  rates  vary  considerably,  on  different  classes  of  companies. 
The  California  rate  on  intra-state  and  the  state's  share  of  inter- 
state earnings  of  sleeping  car  companies  is  per  cent;  the 
Connecticut  Commission  of  1913  recommended  a  3f  per  cent 
rate  for  that  state;  the  Rhode  Island  rate  is  1  per  cent;  Min- 
nesota charges  5  per  cent;  the  Arizona  rate  on  intra-state  earn- 
ings only,  is  7  per  cent. 

All  circumstances  considered  we  think  a  5  per  cent  tax  on 
the  gross  earnings  of  the  Pullman  Company  would  subject  it  to 
a  tax  burden  equivalent  to  that  borne  by  the  general  property 
of  the  state.  This  is  a  higher  tax  than  the  company  now  pays 
taking  the  country  as  a  whole.  In  1912  its  gross  earnings 
amounted  to  $40,103,216,  its  taxes  to  $962,371,  making  the  equiv- 
alent gross  earnings  tax  2.4  per  cent.  Just  what  the  effect  of  a  5 
per  cent  tax  would  have  on  the  revenues  we  have  not  computed 
because  of  lack  of  information.  It  is  safe  to  assume,  however, 
that  it  would  add  to  the  state's  revenues. 

Other  Car  Companies. — For  the  reasons  set  forth  above 
we  recommend  placing  other  car  companies  on  a  gross  earnings 
basis  in  case  the  amendment  carries.  The  legislature  at  its  last 
session  wisely  turned  the  taxes  from  this  source  into  the  state 
treasury.  But  these  companies  are  still  subject  to  ad  valorem 
taxes;  and  all  the  difficulties  encountered  in  determining  the  true 
value  of  the  property  of  the  sleeping  car  companies  is  encount- 
ered in  the  valuation  of  car  companies  engaged  in  carrying 
merchandise. 


The  Express  Companies  101 

Summary. — The  present  method  of  assessing  car  companies 
is  cumbersome  and  uncertain,  and  it  fails  to  reach  the  intangible 
values  connected  with  such  a  business.  If  the  constitution  is 
amended  so  as  to  remove  all  doubt  concerning  the  right  to  impose 
a  tax  on  gross  earnings  we  recommend  that  method  of  taxing  all 
such  companies.  The  tax  should  be  based  upon  all  intra-state 
earnings  and  Nebraska's  share  of  the  inter-state  earnings.  For 
all  these  private  car  companies  we  recommend  a  rate  of  5  per  cent, 
the  proceeds  of  the  tax  to  be  paid  into  the  general  fund  of  the 
state  treasury. 

3.     The'  Express  Companies 

The  Present  Method. — The  express,  telegraph  and  tele- 
phone companies  are  taxed  under  the  same  sections  of  the  revenue 
law  and  by  the  same  method.  Each  company  is  required  to  make  a 
return  to  the  county  assessor  of  its  personal  property  "and  of 
the  gross  receipts  of  its  business  in  said  local  assessing  district 
for  the  year  ending  April  1."  ******  "Such  gross 
receipts  to  be  taken  and  considered  as  an  item  of  property  and 
be  so  listed  and  levied  against  the  same  as  other  property.  Such 
gross  receipts  shall  represent  the  franchise  valuation  which  shall 
not  be  otherwise  assessed." 

While  the  statute  remains  in  its  essential  features  as  enacted 
in  1903,  the  court  has  modified  it  by  interpretation  in  several 
important  respects.  It  was  early  held  that  the  receipts  from 
inter-state  business  were  not  subject  to  taxation  by  the  state. 
State  v.  Fleming,  70  Neb.  523.  In  Western  Union  Telegraph  Co. 
v.  Omaha,  73  Neb.  527,  545,  1905,  the  court  while  upholding  the 
right  of  the  state  to  tax  the  "franchise"  of  corporations  engaged 
in  business  within  its  borders,  held  that  the  tax  must  be  by  val- 
uation and  that  the  amount  of  gross  receipts  of  express,  telephone 
and  telegraph  companies  during  the  year  prior  to  the  time  of 
assessment,  taken  alone,  is  not  a  reasonable  and  just  method 
of  ascertaining  the  value  of  the  franchise  possessed  by  such  cor- 
porations; that  it  fixes  an  arbitrary  rule,  not  founded  upon 
justice  nor  upon  any  definite  relation  between  receipts  and  value 
and  is  in  violation  of  the  rule  laid  down  by  the  first  subdivision 
of  Section  1,  Article  IX  of  the  constitution.  The  law  as  it  stands, 
however,  still  requires  a  return  of  gross  receipts  to  be  treated  as 
an  "item  of  property."  To  what  extent  this  is  done  the  returns 


102  Report  of  Nebraska  Tax  Commission 

do  not  accurately  show.  The  law,  however,  seems  quite  gen- 
erally to  be  complied  with.  As  far  as  the  facts  are  ascertainable 
they  are  as  follows:  In  1911,  the  Railway  Commission  found  the 
"present  value"  of  the  property  of  express  companies  to  be 
$150,007  and  the  "reproduction  value "  $206,806.  The  assessed 
valuation  in  1913,  the  first  year  the  express  company  valuation 
is  given  as  a  separate  item,  was  $206,954,  making  an  actual  value 
of  $1,034,770.  This  seems  to  indicate  that  the  companies  report 
earnings  for  local  taxation  "amounting  to  more  than  $800,000,  a 
sum  not  far  short  of  their  actual  intra-state  earnings.  In  1913 
the  three  large  companies  paid  local  property  taxes  amounting  to 
$15,082.32. 

Local  Occupation  Taxes. — Under  the  law  permitting  munic- 
ipalities to  impose  taxes  on  the  right  to  conduct  various  businesses, 
many  cities  impose  occupation  taxes  on  the  express  companies. 
Sometimes  such  taxes  are  laid  in  proportion  to  earnings,  but 
more  often  in  the  form  of  a  flat  rate  ranging  from  $5  to  $60.  The 
total  local  taxes  paid  by  the  three  large  companies  in  1913  are 
shown  in  the  following  table: 

Taxes  on  Number  of 

Property  Including  Local        Townslmposing 

Name          Earnings  as  Property  OccupationTaxesOccupationTax 

Adams $6,183.25  $1,354.80  32 

American 7,534.96  1,028.92  30 

Wells  Fargo 1,304.11  268.78  8 


$15,082.32  $2,652.50 

The  Two  Per  Cent  Tax  of  1913.— The  legislature  of  1913 
provided  for  an  additional  tax  on  each  express  company  "for  the 
privilege  of  exercising  its  corporate  franchise  or  carrying  on  its 
business  in  such  corporate  or  organized  capacity  in  this  state." 
The  tax  is  payable  on  or  before  November  1  each  year  at  the 
rate  of  2  per  cent  upon  its  gross  earnings  from  intra-state  business, 
apparently  for  the  year  ending  June  30,  preceding.  It  seems 
that  the  "gross  earnings"  were  not  intended  to  cover  receipts 
other  than  those  from  transportation  and  no  provision  is  made  for 
reaching  the  state's  share  of  inter-state  earnings. 

The  question  has  been  raised  whether  this  tax  was  payable 
for  the  year  ending  June  30,  1913.  In  fact  the  validity  of  the 
act  in  its  present  form  has  been  questioned.  In  1913  one  com- 


The  Express  Companies  103 

pany  paid  the  tax,  but  in  1914  none  has  made  the  payment 
within  the  time  fixed  by  law.  If  the  tax  had  been  collected  in 
1913  it  would  have  produced  a  state  revenue  from  the  four  large 
companies  of  nearly  $20,000  as  follows: 

Intra-State  Earnings  Occupation 

for  Year  Ending  June  Tax  at 

Name  30,  1913  2  Per  Cent 

Adams $425,914  $8,518.25 

American 457,540  9,150.80 

Wells  Fargo 57,432  1,148.64 

United  States. .  30,492  629.84 


Total $972,378  $19,447.53 

Summarizing   the   actual   and   anticipated   results   of   the 
present  laws  for  taxing  express  companies  we  have  the  following: 

1.  Payments  made  under  property  tax  (including 
such  gross  earnings  as  were  returned  as  an 

item  of  property • $15,082.32 

2.  Occupation  taxes  paid  to  municipalities 2,652.50 


Total  local  taxes $17,734.82 

3.  The  amount  which  would  have  been  paid  under 
the  2  per  cent  state  occupation  tax  had  it  been 
collected..  ..$19,447.53 


Total  tax  as  now  provided  by  law - $37,182.35 

Conclusions  and  Recommendations:  1.  THE  LOCAL 
OCCUPATION  TAXES. — While  the  right  to  grant  power  to  the 
municipalities  to  impose  occupation  taxes  on  the  express  com- 
panies is  firmly  established  and  the  practice  quite  general  we 
believe  the  policy  is  a  wrong  one  and  should  be  abandoned.  The 
express  business  is  not  one  like  the  sale  of  liquor,  plumbing  and 
the  like  requiring  regulation  and  therefore  suitable  for  the  imposi- 
tion of  a  license  tax.  If  one  is  imposed  it  must  be  for  other  than 
regulatory  reasons.  The  business  is  in  no  sense  a  local  one.  By 
its  very  nature  it  would  seem  unsuited  for  local  taxation.  Every 
transaction  involves  parties  in  more  or  less  widely  separated  parts 
of  the  state.  The  service  giving  rise  to  its  income  is  not  localized, 
nor  is  the  property  by  means  of  which  the  service  is  performed. 


104  Report  of  Nebraska  Tax  Commission 

The  same  economic  grounds  for  denying  the  people  of  any  state 
the  right  to  regulate  inter-state  commerce  exists  for  denying  the 
right  of  any  municipality  to  impose  occupation  taxes  upon  such 
a  business  as  that  of  the  express  companies.  In  our  opinion  the 
municipalities  should  be  confined  to  the  taxation  of  the  tangible 
property  of  such  companies  if  indeed  they  are  allowed  to  impose 
any  tax. 

2.  THE  GROSS  EARNINGS  RETURN  ON  THE  SCHEDULE.— 
For  much  the  same  reasons  we  recommend  the  amendment  of 
Section  6368,  R.  S.  1913  so  as  to  relieve  the  express  companies 
from  returning  their  earnings  to  be  taxed  at  the  local  property 
tax  rate,  thus  leaving  only  the  tangible  property  to  be  entered 
on  the  schedule.    There  is  a  further  reason  for  this  recommenda- 
tion, namely  that  the  present  requirement  is  not  one  that  can  be 
effectively  enforced.     The  confusion  and  uncertainty  in  which 
the  decisions  of  the  supreme  court  have  left  this  part  of  the  law 
requires  that  it  should  be  swept  away  by  repealing  the  provision 
requiring  earnings  to  be  treated  as  property. 

3.  THE  STATE  GROSS  EARNINGS  TAX.— The  act  of  1913  im- 
posing a  tax  of  2  per  cent  on  the  gross  earnings  of  these  companies 
was  a  step  in  the  right  direction  but  it  should  be  amended  to 
meet  certain  deficiencies  in  it. 

The  inadequacy  of  the  value  of  property  as  a  basis  for  taxing 
the  express  business  has  long  been  recognized,  and  there  has  been 
an  agreement  among  students  of  taxation  that  gross  earnings 
constitute  the  most  practicable  basis  for  taxing  it.  The  second 
clause  of  Section  1,  Article  IX  of  the  constitution  specifically 
names  this  interest  among  others  as  one  which  may  be  taxed  in 
any  way  the  legislature  may  direct  in  addition  to  the  tax  by 
valuation  provided  for  in  the  first  clause  of  that  section.  There 
need,  therefore,  be  no  resort  to  the  "occupation  tax"  idea  for 
authority  to  tax  express  companies  on  the  basis  of  their  earnings. 
As  pointed  out  above  such  a  tax  both  because  of  its  economic 
character  and  because  of  the  greater  ease  and  certainty  of  admin- 
istration under  state  authority,  seems  peculiarly  fitted  to  be  a 
source  of  state  revenue. 

The  present  law  makes  no  provision  apparently  for  taxing 
receipts  from  any  other  source  than  transportation.  There 
seems  no  reason  why  the  receipts  from  the  sale  of  money  orders 


The  Telegraph  Companies  105 

should  not  be  included.  This  is  done  under  the  Minnesota  law, 
the  tax  being  paid  in  this  case  on  all  receipts  from  such  orders 
regardless  of  the  place  of  payment. 

Another  change  should  be  made  in  the  definition  of  gross 
earnings.  At  present  they  include  only  those  from  business 
originating  and  terminating  within  the  state.  The  state  is  en- 
titled to  a  tax  on  all  business  originating,  terminating  or  passing 
through  the  state  in  the  proportion  that  the  haul  within  the 
state  is  part  of  the  whole  distance  traversed.  This  right  is  fully 
established  by  the  courts  and  is  made  use  of  in  several  of  the 
states.  We  have  no  accurate  information  as  to  what  addition 
would  be  made  to  the  base  for  the  tax  in  this  state  if  this  item 
were  included,  and  can  therefore  make  no  accurate  estimate  of 
revenue  to  be  expected  from  this  change. 

The  present  rate  is  not  far  from  right  assuming  the  local 
taxation  of  gross  earnings  as  an  item  of  property  at  the  property 
tax  rate.  This  rate  would  fall  not  far  short  of  the  equivalent  of  a 
2  per  cent  tax.  If  the  local  gross  earnings  tax  were  repealed,  as  we 
recommend,  the  present  state  rate  could  be  doubled  without 
creating  a  greater  burden  than  the  law  now  imposes,  and  this 
we  recommend. 

To  summarize:  We  recommend  the  amendment  of  the  state 
gross  earnings  law  so  as  to  place  a  tax  of  4  per  cent  upon  the 
gross  receipts  of  express  companies,  such  receipts  to  include  a 
share  of  the  earnings  from  interstate  business  pro-rated  on  the 
mileage  basis,  and  also  the  receipts  from  money  orders  sold  re- 
regardless  of  their  place  of  payment,  these  taxes  to  be  in  lieu  of 
all  other  taxes  except  those  on  the  real  and  personal  property 
of  the  companies  to  be  paid  at  its  situs.  To  carry  out  this  plan 
we  recommend  further  the  repeal  of  all  laws  giving  the  right 
to  municipalities  to  levy  occupation  taxes  on  express  companies. 
The  results  of  such  legislation  will  be  to  rid  the  present  statute 
of  ambiguities  and  inconsistencies,  to  simplify  the  method  of 
taxing  these  interests,  to  turn  what  is  peculiarly  a  state  source 
of  revenue  into  its  proper  channels,  and  to  increase  the  revenue 
from  this  source. 

4.     The  Telegraph  Companies 

These  companies  and  the  telephone  companies  are  taxed 
under  the  same  provisions  of  law  as  the  express  companies.  The 
county  assessors  value  the  physical  properties  and  presumably 


106 


Report  of  Nebraska  Tax  Commission 


the  "franchise/'  and  the  law  still  requires  the  companies  to  return 
their  gross  earnings  to  be  treated  as  "an  item  of  property."  The 
municipalities  may  impose  occupation  taxes.  The  telegraph 
companies  apparently  do  not  make  as  full  a  return  of  their  earn- 
ings to  the  assessors  as  the  express  companies  do.  The  assessed 
value,  actual  value  for  1913  and  the  Railway  Commission's  re- 
production value  and  "present  value"  of  the  physical  properties 
for  1912  are  shown  in  the  table  which  follows: 


Assessed 
Valuation 
1913 

"Actual 
Value" 
1913 

RAILWAY  COMMISSION'S 

Reproduction 
Value,  1912 

Present 
Value,  1912 

Express  companies  .... 
Telegraph  companies.  . 
Telephone  companies.  . 

$206,954 
229,757 
1,919,162 

$1,034,770 
1,148,785 
9,595,810 

$206,806 
1,600,449 
18,833,423 

$150,007 
957,146 
14,391,395 

Total.  

$2,355,873 

$11,779,365 

$20,640,678 

$15,498,548 

The  figures  indicate  that  no  very  large  return  of  earnings 
is  made  for  taxation  and  in  fact  that  the  assessors  do  not  find 
the  full  value  of  the  physical  property  to  say  nothing  of  the 
"franchise"  value.  The  Commission's  reproduction  value  of  the 
Western  Union's  property  for  1912  was  $1,337,604;  the  return 
of  the  company  to  the  secretary  of  state  for  the  assessment  of 
the  annual  fee  in  1914  was,  "not  to  exceed  $1,500,000"  as  the 
value  of  its  physical  property  employed  in  this  state.  These- 
values  are  carried  on  the  books  as  representing  earnings  power 
and  give  an  indication  of  what  the  assessors  ought  to  place  on  the 
tax  rolls.  It  would  be  strange  if  anything  like  an  accurate  assess- 
ment were  made.  The  same  reasons  exist  for  assessing  the  tele- 
graph companies  on  the  unit  plan  that  make  it  necessary  to  assess 
railroads  on  that  plan.  The  great  majority  of  the  states  which 
levy  ad  valorem  taxes  on  the  telegraph  companies  provide  for 
their  valuation  by  some  central  authority.  Moreover,  the 
nature  of  the  business  is  such  as  to  mark  the  taxes  arising  from  it 
as  a  proper  source  of  state  rather  than  local  revenue. 

Methods  Employed  in  Other  States.— The  Special  Tax 
Commission  of  Connecticut  of  1913  has  prepared  a  summary  of 
the  methods  of  taxing  telegraph  companies  in  the  different  states 
which  we  give  below.  Fuller  details  of  these  methods  are  given 
in  Appendix  A. 


The  Telegraph  Companies  107 

"Telegraph  companies  are  taxed  in  very  different  ways  by 
the  various  states,  most  of  which  combine  one  or  more  methods 
of  taxation.  The  gross  earnings  tax,  taxes  upon  the  value  of 
stocks  and  bonds,  and  ad  valorem  taxes  are  all  in  common  use. 
The  following  is  a  brief  sumrr.ary  of  the  principal  methods  used. 
A  more  detailed  description  of  the  method  of  each  state  will  be 
found  in  Appendix  II. 

Fourteen  states  impose  taxes  upon  the  gross  earnings  of 
telegraph  companies.  In  only  one  of  these,  California,  is  it  the 
sole  tax;  there  it  is  at  the  rate  of  3 1  per  cent  upon  earnings  within 
the  state  and  a  share  of  interstate  earnings. 

Four  states  have  this  as  the  principal  tax,  although  used  in 
connection  with  other  methods  of  taxation.  Maine  taxes  gross 
earnings  1J  to  6  per  cent  according  to  the  amount  of  earnings. 
New  Jersey  also  combines  an  ad  valorem  tax  upon  tangible 
property  with  a  gross  earnings  tax,  the  latter  being  at  the  rate  of 
2  per  cent.  In  Ehode  Island,  telegraph  companies  pay  2  per  cent 
upon  gross  earnings  and  are  taxed  upon  real  estate  under  the 
general  property  tax.  Texas  has  a  gross  earnings  tax  of  2f  per 
cent,  license  taxes,  and  local  taxes  upon  property.  New  Jersey's 
tax  is  upon  earnings  within  the  state  and  a  share  of  interstate 
earnings.  The  other  states  tax  state  earnings  only. 

Eight  other  states  have  the  gross  earnings  tax  together  with 
ad  valorem  taxes  upon  all  or  part  of  the  property  of  the  companies. 

yermont  allows  a  3  per  cent  tax  upon  gross  earnings  (collect- 
ed within  the  state)  as  an  alternative  to  special  license  taxes 
upon  wire  mileage. 

Besides  the  gross  earnings  tax,  the  principal  methods  of  tax- 
ing telegraph  companies  is  by  means  of  ad  valorem  taxes  on  their 
property.  Sixteen  states  tax  all  the  property  of  the  companies 
and  impose  no  other  taxes.  Fourteen  states  use  the  ad  valorem 
tax  as  the  principal  tax  combined  with  other  methods,  and  eleven 
other  states  make  use  of  property  taxes  through  using  some 
other  tax  as  the  principal  one. 

In  eight  states  the  principal  tax  on  telegraph  companies  is 
based  on  the  valuation  of  stock  and  bonds  or  stock  only,  though 
in  all  cases  combined  with  some  other  form  of  taxation. 

Only  two  states  base  their  system  of  taxing  telegraph  com- 
panies on  an  arbitrary  basis  as  in  the  Connecticut  system.  Del- 
aware has  a  tax  on  wire  mileage  at  rates  of  60  cents,  30  cents,  and 
20  cents,  upon  the  longest  wire,  the  second  longest  wire,  and 
other  wires,  respectively.  Vermont  allows  the  companies  to 
choose  between  a  gross  earnings  tax  of  3  per  cent  (on  earnings 
collected  within  the  state)  and  a  license  tax  of  60  cents  per  mile 
for  the  first  wire  and  40  cents  for  each  additional  wire.  A  number 
of  other  states  use  special,  privilege,  and  license  taxes  as  sup- 
plementary to  other  taxes  which  are  thej[main^bases  of  their 
system," 


108  Report  of  Nebraska  Tax  Commission 

Recommendations. — In  case  the  legislature  is  given  the 
power  to  do  so  by  the  adoption  of  the  amendment,  we  recom- 
mend a  tax  of  4  per  cent  upon  the  gross  earnings  of  the  telegraph 
companies  including  the  earnings  from  intra-state  business  and 
a  proportion  based  upon  mileage  of  the  receipts  from  business 
passing  through,  into  or  out  of  the  state,  and  that  this  tax  shall 
be  in  lieu  of  all  other  taxes  except  those  on  real  estate  owned,  the 
proceeds  to  be  turned  into  the  general  fund  of  the  state  treasury. 

If  the  present  constitutional  provisions  are  retained,  we 
recommend  that  the  property  of  the  telegraph  companies  be 
assessed  by  the  proposed  tax  commission,  and  in  case  no  com- 
mission is  created  by  the  State  Board  of  Equalization  and  Assess- 
ment, that  the  property  be  taxed  at  the  average  rate  for  the 
state,  and  that  the  taxes  be  paid  into  the  state  treasury.  We 
believe  by  this  method  of  assessment  the  "franchise  value"  of 
the  companies  can  be  reached.  If,  however,  the  ad  valorem 
taxes  be  found  inadequate  for  this  interest,  the  way  lies  open 
through  the  second  clause  of  Section  1,  Article  IX,  to  impose  a 
business  tax  based  on  earnings.  All  local  taxes  based  on  earn- 
ings, and  all  municipal  occupation  taxes  should  be  abolished. 

5.     The  Telephone  Companies 

There  are  reasons,  because  of  the  essentially  local  character  of 
the  telephone  business,  why  this  interest  may  properly  be  left 
subject  to  local  taxation.  But  the  method  of  assessment  should 
be  changed.  We  recommend  that  in  case  the  ad  valorem  system 
is  retained  that  the  assessment  of  this  class  of  property  be  made 
along  with  all  other  public  service  property  by  the  proposed 
tax  commission.  If  all  the  companies  were  purely  commercial 
ones  there  would  be  good  reason  for  placing  them  on  a  gross 
earnings  basis  along  with  the  telegraph  companies.  An  effective 
assessment  that  will  reach  the  "franchise"  or  "corporate  excess r 
seems  a  fairly  satisfactory  method,  however,  of  dealing  with  both 
commercial  and  mutual  companies  and  we  recommend  the 
retention  of  the  ad  valorem  method.  All  special  local  taxes 
should  be  abolished  in  the  case  of  these  companies  as  in  the  case 
of  express  and  telegraph  companies. 

The  methods  of  taxing  telephone  companies  in  other  states 
have  been  thus  summarized  by  the  Connecticut  Corr.mission  of 
1913.  Fuller  details  are  printed  in  Appendix  (A). 


The  Telephone  Companies  109 

"Some  light  on  the  problem  of  taxation  of  telephone  com- 
panies may  be  obtained  from  the  experience  of  other  states. 
The  value  of  such  comparison,  however,  is  decidedly  limited  by 
the  great  diversity  of  methods  employed  and  the  almost  complete 
lack  of  uniformity  in  the  systems  of  the  several  states.  In  Ap- 
pendix II  of  this  Report  will  be  found  an  abstract  of  the  methods 
employed  in  the  taxation  of  telephone  companies  by  each  of  the 
states  in  the  United  States.  In  the  present  chapter  we  shall 
attempt  to  give  only  a  very  brief  summary  of  the  principal 
methods  employed  by  other  states. 

Apart  from  the  old-fashioned  tax  on  the  property  of  the 
telephone  companies,  which  still  prevails  in  many  of  the  states, 
the  most  common  method  of  taxation  is  the  gross  earnings  tax. 
Eighteen  states  make  use  of  the  tax  on  gross  receipts  to  a  greater 
or  less  extent.  In  four  states  it  is  the  only  tax  imposed  upon  the 
operative  property  of  telephone  companies.  These  states,  with 
the  rates  imposed  are  as  follows: 

California,  3J;  Maine,  1J  to  6%,  according  to  the  amount  of 
the  earnings  (from  business  wholly  within  the  state),  Minnesota, 
3%;  Wisconsin,  2|  to  5%,  according  to  the  amount  of  the  earn- 
ings. Except  in  Maine,  the  tax  is  upon  earnings  from  state  busi- 
ness and  a  proportionate  share  of  interstate  earnings. 

Four  other  states  use  the  gross  earnings  tax  (limited  to  bus- 
iness wholly  within  the  state),  as  the  principal  tax,  although 
accompanied  by  other  forms  of  taxation.  Rhode  Island  taxes  gross 
earnings  at  the  rate  of  2%,  in  addition  to  local  taxes  on  real 
estate.  The  District  of  Columbia  imposes  a  gross  earnings  tax 
of  4%,  together  with  a  district  ad  valorem  tax  on  realty.  Mary- 
land imposes  a  2%  gross  earnings  tax,  a  tax  on  capital  stock  and 
a  tax  on  real  estate.  Ne(w  Jersey  taxes  gross  earnings,  at  2%, 
but  allows  also  local  ad  valorem  taxes  on  tangible  property. 

Nine  states  accompany  the  gross  earnings  tax  with  an  ad 
valorem  tax  on  all  or  part  of  the  property  of  the  companies. 
Vermont  allows  telephone  companies  to  choose  either  a  gross 
earnings  tax  (on  earnings  collected  within  the  state),  at  the  rate 
of  3  per  cent,  or  a  tax  of  40  cents  on  each  transmitter  and  30 
cents  on  each  mile  of  wire. 

Only  two  other  states  use  methods  similar  to  that  of  Con- 
necticut; i.  e.,  select  some  arbitrary  basis  for  the  imposition  of 
the  tax.  Delaware  uses  a  combination  of  the  tax  on  transmitters 
and  the  wire  mileage  tax.  The  second  state  is  Vermont,  as 
described  above. 

Besides  these  methods  the  three  principal  systems  in  force 
in  other  states  ara:  (1)  taxes  based  on  the  value  of  the  stocks  and 
bonds,  (2)  ad  valorem  taxes  on  the  property  of  the  companies, 
and  (3)  license  taxes,  privilege  taxes  and  various  other  special 
taxes." 


110  Report  of  Nebraska  Tax  Commission 

II.      THE   BANKS 

The  banks  are  not  taxed  as  such.  The  shares,  however,  are 
assessed  to  the  owners,  and  the  tax  collected  by  the  bank.  This 
arrangement  is  made  necessary  by  the  restrictions  placed  by 
Congress  on  the  taxation  of  national  banks,  which  are  regarded 
as  creatures  and  agents  of  the  federal  government.  A  variety  of 
methods  may  be  followed  in  making  the  assessment  and  in  the 
distribution  of  the  tax.  The  Nebraska  statute  requires  the 
county  assessor  to  "determine  and  settle  the  true  value"  of  the 
shares,  and  in  doing  so  "shall  take  into  consideration  the  market 
value  of  such  stock,  if  any,  and  the  surplus  and  undivided  profits." 
The  value  of  real  estate  and  tangible  personalty  is  deducted  from 
the  aggregate  value  of  the  shares,  and  the  remainder  divided  by 
the  number  of  shares  to  find  the  value  of  each. 

The  law  seems  to  require  amendment  in  two  important 
respects:  First,  in  regard  to  administration;  and  second,  in  regard 
to  deductions  of  mortgages  now  permitted  under  the  mortgage 
tax  law. 

1.  The  most  common  method  of  assessing  bank  stock  is 
to  list  it  at  its  "book  value",  i.  e.  the  sum  found  by  adding 
together  the  capital,  the  surplus  and  the  undivided  profits. 
This  sum  represents  the  amount  put  into  the  enterprise  by  the 
shareholders  but  not  necessarily  the  "true  value."  The 
value  of  a  thing  is  what  it  will  exchange  for  in  the  ordi- 
nary course  of  trade.  But  bank  stock  does  not  change  hands 
frequently  and  its  value  must  be  determined  by  its  earn- 
ing power.  This  cannot  usually  be  done  by  the  local 
assessor.  He  can  of  course  determine  the  "book  value"; 
but  to  find  the  true  value  which  the  constitution  and  the  law 
requires  to  be  assessed,  he  has  neither  the  skill  nor  the  informa- 
tion. This  information  is  properly  enough  given  to  the  proper 
state  authority  but  perhaps  should  not  be  placed  in  the  hands  of 
the  local  assessor.  The  proper  course  seems  clear:  To  place 
the  assessment  of  this  class  of  property  in  the  hands  of  a  central 
officer.  We,  therefore,  recommend  that  the  assessment  of  bank 
shares  be  placed  in  the  hands  of  the  proposed  state  tax  com- 
mission. In  case  no  commission  is  provided  for  by  the  legisla- 
ture, we  recommend  that  the  assessment  of  these  shares  be  made 
by  the  State  Board  of  Equalization,  The  result  of  such  an  ar- 


Taxation  of  Insurance  Companies  111 

rangement  will  be  an  increase  in  the  taxes  from  this  source  and 
a  more  unif6rm  apportionment  of  them  as  between  banks. 

2.  Deduction  of  Mortgages. — The  mortgage  tax  law  of 
1911  was  not  intended  to  affect  the  method  of  taxing  banks. 
The  supreme  court  has  held,  however,  that  after  arriving  at  the 
value  of  the  shares,  the  mortgages  owned  by  the  banks,  secured  on 
Nebraska  real  estate,  whether  they  contain  the  tax  clause  or  not, 
may  be  deducted  in  the  same  way  that  the  value  of  real  estate 
is  deducted.  We  have  discussed  the  effect  of  this  interpretation 
of  the  law  in  the  section  dealing  with  the  mortgage  tax  law. 

Our  recommendation  is,  for  the  reasons  set  forth  elsewhere 
(p.  89),  that  Section  6343  R.  S.  1913  be  so  amended  as  to  restrict 
the  privilege  of  deductions,  to  real  estate  used  for  a  banking-house 
and  to  furniture  and  fixtures. 

III.   THE  TAXATION  OF  INSURANCE  COMPANIES 

The  taxation  of  insurance  companies,  owing  to  the  great 
variety  in  the  character  of  organization,  kind  of  policies  written, 
nature  of  assets,  and  the  widely  scattered  ownership  of  the  same, 
offers  some  peculiar  difficulties  that  have  nowhere  been  com- 
pletely overcome  and  in  Nebraska  are  very  far  from  having  been 
met.  The  most  fundamental  question  in  connection  with  these 
interests  is  whether  they  ought  to  be  taxed  at  all.  It  is  earnestly 
contended  by  many  that  on  account  of  the  beneficent  social  service 
they  perform,  insurance  companies  should  be  freed  from  taxes  as 
churches  and  charitable  institutions  are,  though  for  a  somewhat 
different  reason.  Frugality  and  thrift,  it  is  said,  are  the  founda- 
tions of  industrial  development,  and  a  tax  upon  the  savings  put 
into  insurance  is  a  tax  upon  those  qualities  and  tends  to  check 
their  exercise.  This  no  doubt  is  true;  but  it  is  equally  true  of 
savings  and  accumulations  in  any  form.  It  is  not  peculiarly 
virtuous,  as  is  sometimes  argued,  for  a  man  to  make  provision  for 
the  future  in  this  particular  way.  Savings  of  all  kinds  that  serve 
to  provide  against  want  and  make  an  enlargement  of  industry 
possible  are  beneficent,  and  it  does  not  appear  that  life  insurance 
is  so  different  in  these  respects  as  to  warrant  relieving  such  in- 
terests from  taxation.  As  long  as  taxes  are  based  upon  posses- 
sions we  see  no  good  reason  why  investments  in  insurance  shoulc 
receive  any  special  consideration. 

The  argument,  however,  that  the  assets  of  insurance  com- 


112  Report  of  Nebraska  Tax  Commission 

panics,  consisting  largely  of  securities,  the  mere  evidences  of 
wealth  reached  in  a  direct  way  by  the  taxing  officer,  is  another 
matter,  and  is  worthy  of  careful  consideration.  What  has  been 
said  elsewhere  (p.  46)  concerning  the  double  taxation  involved 
in  assessing  wealth  and  also  the  obligations  secured  by  it,  or  the 
evidences  of  ownership  of  it  applies  here.  But  if  these  forms  of 
property  are  to  be  exempted  it  should  be  not  because  they  are 
held  by  insurance  companies,  but  because  of  their  character.  It* 
such  property  is  to  be  taxed  at  a  lower  rate  than  other  kinds  of 
property  the  low  rate  should  of  course  apply  to  the  securities  of 
insurance  companies  as  well  as  to  those  of  individuals.  While 
some  European  countries  have  pursued  the  policy  of  encourag- 
ing insurance  by  exempting  such  interest  from  taxation,  the 
various  states  have  all  subjected  them  to  some  form  of  taxation. 
The  method  varies  greatly  in  the  different  states,  and  even  within 
the  same  state. 

The  Present  Method  in  Nebraska.— Article  VI  of  the 
revenue  law  (Chapter  69  R.  S.  1913)  provides  that  all  insurance 
companies  doing  business  in  the  state,  except  certain  specified 
classes,  shall  pay  a  premium  tax  in  some  form.  No  specific 
provision  is  made  in  this  article  or  elsewhere  in  the  law  for  ad 
valorem  taxes  on  such  companies.  But  under  the  constitutional 
requirement  that  all  persons  and  corporations  shall  be  taxed  in 
proportion  to  the  value  of  their  property,  the  courts  have  held 
that  insurance  companies  of  whatever  kind  are  subject  to  the 
general  property  tax.  The  premium  tax,  in  spite  of  the  curious 
wording  of  the  law,  is  a  business  tax  authorized  by  the  constitu- 
tion (Art.  IX,  Sec.  1,  Clause  2)  in  addition  to  the  ad  valorem  tax 
imposed  on  all  property  except  that  specifically  exempted. 
"Fraternal  beneficiary  associations  and  such  mutual  companies 
as  operate  on  the  assessment  plan,  have  no  capital  stock  and 
make  no  dividends,  and  whose  scheme  of  insurance  does  not  con- 
template the  return  of  any  percentage  of  earnings  or  profits  to 
policy  holders,"  do  not  come  under  the  provisions  of  this  article. 
All  others  must  pay  some  form  of  premium  tax. 

Foreign  Life  and  Accident  Companies 
Each  foreign  life  and  accident  company  is  required  to  pay 
into  the  state  treasury  at  the  time  of  making  its  annual  report 
to  the  insurance  board  a  tax  at  the  rate  of  2  per  cent  upon  the 


Foreign  Accident,  Liability  and  Surety  Companies         113 

"amount  of  gross  premiums  received  by  it  during  the  preceding 
calendar  year  for  business  done  in  this  state,  including  all  in- 
surance upon  the  lives  of  persons  residing  in  the  state,  whether 
such  insurance  was  written  during  such  preceding  year  or  prior 
thereto." 

In  addition  to  these  taxes  life  companies  are  required  to  pay 
the  following  fees : 

For  admission $50.00 

"  For  filing  annual  statement 20.00 

For  certificate  of  authority 2.00 

For  each  agent's  license 2.00 

For  copy  of  papers  filed .  Indefinite 

For  examinations  when  needed Indefinite 

These  fees,  however,  and  the  gross  premiums  tax  may  be 
regarded  merely  as  minimum  charges;  for  under  the  so-called 
reciprocal  or  retaliation  section  of  the  insurance  code  both  the 
tax  and  the  fees  may  vary  for  any  particular  company  accord- 
ing to  the  charges  which  would  be  imposed  upon  Nebraska  com- 
panies doing  business  in  the  state  which  chartered  the  company 
in  question.  Thus  Ohio  has  a  2J  per  cent  tax  on  foreign  com- 
panies; and  our  rate  for  Ohio  companies  is  therefore  2J  per  cent. 
For  the  same  reason  an  Indiana  company  would  pay  3  per  cent 
on  its  gross  receipts  in  this  state  and  if  an  Oklahoma  company 
should  apply  for  admission  it  would  be  required  to  pay  a  fee  of 
$200  instead  of  the  $50.00  provided  in  our  law.  All  insurance 
companies  paying  the  fees  and  making  reports  to  the  insurance 
department  are  exempt  from  the  corporation  occupation  tax 
provided  by  Chapter  240  of  the  Laws  of  1913. 

Foreign  Accident,  Liability  and  Surety  Companies  are 

taxed  at  the  same  rate  on  their  premium  receipts  as  the  life  com- 
panies pay.  The  taxes  paid  into  the  state  treasury  for  the  years 
1909-1913  have  been  as  follows: 

Accident,  Liability, 
Year        Legal  Reserve  Life  Surety,  Etc.  Total 

1909  $61,001.18         $7,659.30     $58,660.48 

1910  61,481.22          10,891.32      72,372.54 

1911  65,772.20          10,240.38      76,012.58 

1912  70,918.40         10,839.77      81,758.17 

1913  79,139.65         15,285.50     94,425.15 


114  Report  of  Nebraska  Tax  Commission 

Foreign  Fire  Companies. — These  companies  pay  taxes  on 
their  tangible  property  at  its  situs.  They  are  also  taxed  locally 
on  their  premium  receipts  though  such  receipts  are  treated  as 
"an  item  of  property."  The  law  of  1903  required  a  return  of 
premium  receipts  to  the  local  assessor  by  each  agent  and  made 
him  personally  liable  for  the  tax.  It  was  apparently  the  purpose 
of  the  law  to  base  this  tax  on  "gross  premiums/'  permitting  no 
deductions  for  reinsurance  and  premiums  returned  on  canceled 
insurance.  Since  these  deductions  were  authorized  in  the  case 
of  domestic  companies,  the  supreme  court  has  held  they  must  also 
be  allowed  for  foreign  companies.  The  section,  however,  has 
remained  on  the  statute  book  unchanged. 

Under  the  reciprocal  provisions  of  the  insurance  law  foreign 
fire  companies  may  be  required  to  pay  additional  taxes  into  the 
state  treasury.  In  1912,  $12,460  were  collected  in  this  manner  and 
in  1913  $10,448.27.  On  the  other  hand,  as  the  law  is  now  ad- 
ministered receipts  for  sums  paid  by  these  companies  for  local 
taxes  are  accepted  as  credits  against  taxes  imposed  by  the  In- 
surance Board  under  the  reciprocal  section. 

Domestic  Insurance  Companies 

All  Nebraska  life,  fire,  accident  and  surety  companies, 
except  fraternal  and  mutual  assessment  companies,  are  grouped 
together  under  the  present  law  for  purposes  of  taxation.  They 
are  all  subject  to  a  tax  on  any  real  estate  or  personal  property. 
Under  Section  6357  of  the  Revised  Statutes  of  1913  (Sec.  69,  Ch. 
69),  they  are  also  required  to  pay  a  tax  into  the  local  treasury 
based  on  premium  receipts.  Each  company  is  taxed 

"in  the  county,  town,  city,  village  and  school  district  where  the 
agent  conducts  business  upon  the  gross  amount  of  premiums 
received  by  it  for  all  Nebraska  business  done  within  the  state 
during  the  preceding  calendar  year  less  amount  of  same  ceded 
to  other  companies  as  reinsurance  through  regularly  authorized 
agents  in  this  state  and  less  premiums  returned  on  canceled 
policies.  Such  gross  receipts  less  reinsurance  and  cancellations 
shall  be  taken  as  an  item  of  property  of  that  value  and  be  assessed 
and  taxed  on  the  same  percentage  as  other  property.  The  agent 
shall  render  the  list  and  be  personally  liable  for  the  tax." 

It  will  be  convenient  to  deal  with  each  of  these  companies 
separately. 


ic  Insurance  Companies  115 

The  Fire  Companies. — In  addition  to  the  tax  provided 
for  in  Article  6,  Chapter  69,  as  described  above,  every  fire  in- 
surance company  doing  business  in  the  state  except  Farmers' 
Mutuals  is  required  to  pay  into  the  state  treasury  annually  a  tax 
of  three-eighths  of  one  per  cent  on  the  grosk  premium,  fire  receipts, 
after  deducting  cancellations  and  reinsurances  on  Nebraska  busi- 
ness for  the  maintenance  of  the  department  of  State  Fire  Com- 
missioner. (Sec.  2510  R.S.  1913).  During  the  biennium  ending  Nov- 
ember 30, 1914,  this  tax  yielded  $25,295.  A  further  tax,  not  to  exceed 
$5.00  per  year  may  be  imposed  in  municipalities  having  less  thah 
25,000  population,  for  the  use  of  volunteer  fire  departments  or- 
ganized under  the  state  law.  These  special  taxes  are  for  specific 
purposes  in  which  the  companies  themselves  have  direct  interest 
and  partake  more  of  the  character  of  an  annual  assessment  than 
a  tax.  Since  they  operate  uniformly  upon  all  companies  they 
require  no  particular  comment  from  this  Commission. 

The  sections  providing  for  the  tax  on  premium  receipts  have 
some  objectionable  features.  We  recommend  that  the  sections 
be  amended  so  as  to  conform  to  the  findings  of  the  courts  with 
respect  to  the  equal  treatment  of  home  and  foreign  companies 
in  the  matter  of  deductions.  As  a  matter  of  practice  the  return 
of  premium  receipts  is  not  made  by  each  agent  but  by  the  home 
company.  Frequently  no  return  is  made  at  all,  and  when  made 
it  is  often  nominal.  It  would  contribute  to  simplicity  of  admin- 
istration and  ensure  greater  certainty  and  equality  of  treatment 
if  these  sections  were  administered  through  the  Insurance  Board 
and  the  proceeds  turned  into  the  state  treasury  as  in  the  case  of 
foreign  life  companies.  In  1913  the  net  premiums  of  stock  fire 
companies  amounted  to  $4,409,963.  A  2  per  cent  tax  would 
yield  $88,199.26.  But  we  have  no  means  of  computing  accurately 
the  financial  results  of  the  change  since  we  do  not  know 
the  amount  of  taxes  paid  by  these  companies.  Assuming  a  full 
return  whether  administered  locally  or  centrally,  a  tax  of  2  per 
cent  would  be  the  equivalent  of  a  one  hundred  mill  levy  on  a 
one-fifth  valuation.  The  municipalities  where  the  bulk  of  the 
premium  income  arises  have  levies  that  approximate  and  in  some 
cases  exceed  100  mills.  It  is  probable  that  the  average  property 
tax  rate  is  somewhat  below  2  per  cent  on  the  true  value  and  that 
assuming  a  full  return  there  would  be  a  slight  loss  of  revenue, 
But  it  is  quite  certain  that  a  fuller  return  would  be  secured 
through  the  Insurance  Board  than  is  now  made,  resulting  in  a 


116  Report  of  Nebraska  Tax  Commission 

considerable  addition  to  the  public  revenue.  This,  however, 
would  not  be  the  greatest  gain  arising  from  the  change.  Equality 
of  treatment  would  be  more  nearly  attained  and  this  is  of  more 
importance  than  an  increase  of  revenue. 

The  Domestic  Life  Companies. — There  are  ten  of  this 
class  of  companies.  They  are  taxed  upon  a  somewhat  different 
basis  from  foreign  companies  doing  business  in  the  state.  The 
latter  pay  a  tax  of  2  per  cent  on  the  premium  receipts  from  policies 
held  by  residents  of  the  state,  ''whether  such  insurance  was 
written  during  such  preceding  year  or  prior  thereto."  The 
absence  of  the  clause  just  quoted  from  the  section  dealing  with 
domestic  companies  has  given  rise  to  a  construction  of  the  law 
by  these  companies  that  "gross  amount  of  premiums  received*  *  * 
for  all  Nebraska  business  done  within  the  state  during  the  preced- 
ing calendar  year,"  means  only  the  premiums  received  on  new 
policies  written  during  the  year.  This  construction  is  highly 
favorable  to  the  domestic  companies.  Again  the  domestic  com- 
panies are  permitted  to  make  deductions  for  reinsurance  and 
premiums  returned  on  lapsed  policies  while  foreign  companies 
are  not.  Furthermore,  the  domestic  companies  usually  do  not 
return  all  the  premiums  collected  even  under  the  narrow  con- 
struction they  thus  give  to  the  law.  It  was  without  doubt  an- 
ticipated that  policy  holders  in  each  county  would  pay  their 
premiums  to  a  local  agent  who  would  turn  them  in  as  an  item  of 
property  for  assessment.  But  it  is  not  the  practice  of  the  home 
companies  to  maintain  agencies  out  in  the  state  and  collections 
are  for  the  most  part  made  through  the  local  bank,  or  by  check 
or  money  order  payable  at  the  home  office.  Under  such  circum- 
stances it  has  been  quite  natural  for  the  companies  to  assume 
that  it  was  the  business  of  the  assessor  in  each  county  to  assess 
premium  receipts  arising  there  although  it  is  well  known  there 
is  no  possibility  of  their  doing  so.  On  the  other  hand,  if  the 
assessor  of  the  county  where  the  home  office  is  located  should 
demand  a  return  of  premiums  for  the  whole  state  the  companies 
may  fairly  contend  that  authority  had  not  been  given  him  to 
correct  the  shortcomings  of  his  fellow  assessors.  For  the  most 
part  they  return  only  the  premiums  on  policies  held  within  the 
one  county  where  the  company  is  domiciled.  This  is  not  always 
the  case.  In  the  same  county  it  was  found  that  in  1913  of  two 
companies  having  approximately  the  same  premium  income 


Accident  and  Surety  Companies  117 

from  Nebraska  business,  one  was  assessed  on  a  return  of  $10,841 
and  the  other  on  a  return  of  $131,105,  the  latter  being  the  premium 
receipts  for  the  whole  state.  Such  a  glaring  inequality  ought  to 
be  impossible  under  the  revenue  law. 

The  present  law  does  not  meet  the  requirements  of  equality. 
The  domestic  companies  are  unduly  favored  as  Section  69  is  now 
administered.  Instead  of  paying  upon  their  gross  premium 
receipts  as  foreign  companies  do,  they  pay  upon  premiums  from 
(1)  new  business,  (2)  within  the  county  containing  the  home  office, 
(3)  after  making  deductions  not  allowed  the  foreign  companies. 
The  remedy -is  clear.  If  the  premium  receipts  tax  is  to  be  retained 
we  recommend  that  it  be  administered  by  the  Insurance  Board 
and  that  the  rate  be  fixed  at  2  per  cent,  the  same  as  that  paid  by 
foreign  companies. 

Accident  and  Surety  Companies. — The  same  defects 
show  themselves  in  the  taxation  of  domestic  accident  and  surety 
companies  as  are  shown  in  taxing  the  life  companies.  For  the 
reasons  set  forth  above,  we  recommend  that  the  assessment  of 
these  companies  be  placed  in  the  hands  of  the  Insurance  Board 
and  that  they  be  taxed  at  the  same  rate  as  foreign  companies 
of  the  same  class. 

Effect  of  Central  Administration. — Our  recommendation 
is  that  all  insurance  companies  subject  to  a  premium  tax  be 
required  to  pay  this  tax  into  the  state  treasury  at  the  same  rate 
that  foreign  companies  pay.  What  the  exact  financial  results 
of  substituting  centralized  control  for  the  present  method  would 
be  cannot  be  determined  from  available  data.  But  it  is  safe  to 
say  that  the  premium  taxes  on  those  companies  now  paying 
locally  would  be  more  than  doubled  by  the  change.  The  greatest 
gain  from  the  change,  however,  from  a  haphazard  system  of 
self-assessment  to  one  of  certainty  would  consist  in  the  more 
equitable  treatment  of  competing  companies. 

The    Insurance   Companies   and   the   Property   Tax. — 

We  have  thus  far  discussed  only  the  tax  on  premiums  of  insurance 
companies.  But  the  supreme  court  has  held  that  this  is  not  in 
lieu  of  the  property  tax,  and  under  the  present  constitution  can- 
not be  made  so.  The  court  in  speaking  of  the  2  per  cent  tax 
on  premiums  has  said:  "This  is  a  business  tax  imposed  under 
the  second  clause  of  Sec,  1,  Art<  ?  of  the  Constitution,  and  such 


118  Report  of  Nebraska  Tax  Commission 

companies  are  also  liable  for  taxation  upon  all  their  property 
within  the  state  the  same  as  other  corporations  or  individuals." 
Speaking  of  the  premium  receipts  tax  on  domestic  companies 
the  court  says:  "This  tax  also  is  a  business  tax  and  each  of  such 
domestic  companies  is  also  liable  to  be  taxed  upon  its  tangible 
property."  Royal  Highlanders  v.  State,  Judge  Letton  concurring 
opinion,  77  Neb.  18,  29.  And  in  a  later  case  speaking  particu- 
larly of  the  life  companies  the  court  says:  "It  is  intolerable,  how- 
ever, to  contemplate  a  situation  by  which  the  large  amount  of 
capital  profitably  invested  in  the  insurance  business  by  domestic 
companies  may  wholly  escape  taxation  and  remain  exempt  from 
contributing  its  just  share  to  the  maintenance  of  the  protection 
afforded  by  the  state."  Bankers  Life  etc.  v.  Ccunty  Beard, 
89  Neb.  469,  474,  (1911). 

No  adequate  provision  of  law  has  been  made  for  reaching 
this  property.  Here  is  confessedly  one  of  the  most  intricate 
problems  with  which  tax  officers  have  to  deal;  and  yet  the  law  is 
silent  when  it  should  be  most  explicit,  and  has  left  the  adminis- 
tration of  the  law  in  the  weakest  hands  when  it  should  be  placed 
in  the  strongest.  The  legislature  has  in  this  matter,  as  in  some 
others,  abdicated  to  the  county  assessor.  It  is  no  wonder  the 
supreme  court  in  the  case  last  cited,  after  calling  attention  to 
the  constitutional  mandate  upon  the  legislature  to  provide  "a 
just  and  equitable  method  of  taxing  our  domestic  insurance 
companies,"  concludes  that  "it  would  seem  that  it  has  failed  to 
perform  its  full  duty  in  that  matter." 

In  1909  the  assessor  of  Lancaster  county  gave  his  own 
interpretation  to  the  law.  A  capital  stock  life  company,  with 
a  capital  of  $100,000,  had  returned  its  office  furniture  and  fix- 
tures and  the  premiums  on  new  business  in  the  county  amounting 
to  $3,175  as  the  basis  for  its  tax.  The  assessor  added  to  the 
schedule  the  capital  stock  of  the  company  its  "surplus,  conting- 
ent reserves  and  other  forms  of  property,"  all  of  which  he  valued 
at  $611,000.  The  supreme  court,  after  making  use  of  the  language 
above  quoted,  reaches  the  following  conclusion: 

"Therefore,  in  view  of  the  requirement  of  the  constitution, 
we  are  inclined  to  the  opinion  that  the  other  and  more  general 
provisions  of  the  revenue  law  are  broad  enough  -to  require  such 
companies  to  pay  a  tax  upon  their  capital  stock;  but  the  tax 
must  be  based  upon  the  actual  value  of  such  stock,  which,  in  the 


Accident  and  Surety  Companies  119 

present  condition  of  the  revenue  law,  may  be  ascertained  by 
Sections  10955,  10967,  Ann.  St.  1909,  which  define  methods  for 
ascertaining  the  value  of  the  capital  stock  of  certain  corporations. 
*****  In  express  terms  Section  10955,  supra,  (dealing  with  the 
assessment  of  banks)  provided  that  after  ascertaining  the  value 
of  the  capital  stock  of  the  corporation  in  the  manner  therein 
described,  there  shall  be  deducted  therefrom  the  value  of  its  real 
estate  and  tangible  property  otherwise  assessed,  and  the  remainder 
is  to  be  taken  and  considered  as  the  taxable  value  of  its  capital 
stock.  It  is  a  fundamental  truth,  which  needs  no  demonstration, 
that  when  the  value  of  the  capital  stock  of  a  corporation  has  been 
correctly  ascertained  such  value  embraces  not  only  its  surplus, 
but  all  of  its  property  and  assets  of  every  kind  and  nature.  It 
therefore  appears  from  the  record  that  the  action  of  the  assessor 
and  the  order  of  the  county  board  of  equalization  were  unjust 
and  inequitable,  and  were  made  and  pronounced  without  legal 
authority,  for  such  action  clearly  falls  within  the  ban  of  double 
taxation,  which  the  law  does  not  tolerate  or  permit."  Bankers  Life 
Ins.  Co.  v.  County  Board,  89  Neb.  469,475. 

At  the  same  time  this  case  was  decided  opinions  were  handed 
down  in  two  fire  insurance  company  cases  involving  the  same 
question  of  law.  From  the  cautious  wording  of  the  opinion  and 
the  syllabus,1  it  seems  that  the  court  is  not  fully  committed  to  the 
taxation  of  these  companies  by  a  method  analogous  to  that 
employed  for  taxing  banks.  But  if  this  should  become  the 
accepted  method,  it  leaves  some  important  questions  unsettled. 
It  does  not  seem  applicable,  for  example,  to  mutual  companies 
which  have  no  capital  stock.  The  owners  of  the  company  are  the 
policy-holders.  If  insurance  companies  are  to  be  put  on  the  same 
footing  as  banks,  how  are  the  reserves  to  be  treated?  The  capital 
stock  of  banks  is  but  a  fraction  of  the  funds  used  in  the  banking 
business.  The  capital  stock  is  assessed  to  the  shareholders  and 
the  deposits  to  the  depositors.  Likewise  the  capital  stock  of  the 
insurance  companies  is  unimportant  compared  with  the  invest- 
ments which  they  control.  Thus  the  aggregate  capital  of  the 

1  "It  is  probable  that  under  the  general  provisions  of  the  revenue  law 
of  1903  (Laws  1903,  Ch.  73)  domestic  insurance  companies  may  be  required 
to  list  their  capital  stock  for  taxation,  but  if  the  capital  stock  is  taxed,  its 
value  must  be  ascertained  in  the  manner  provided  by  Section  10955,  Ann. 
St.  1909,  and  when  such  value  is  ascertained  there  must  be  deducted  there- 
from the  value  of  the  real  estate  and  other  tangible  property  otherwise  taxed, 
and  the  remainder  will  furnish  the  amount  upon  which  the  corporation  may  be 
levied." 


120  Report  of  Nebraska  Tax  Commission 

domestic  life  stock  companies  is  $652,322;  their  aggregate 
assets  amount  to  $14,171,756.  These  assets  are  property  belong- 
ing to  some  one — whether  the  companies  or  the  policy  holders  is 
immaterial.  Under  the  present  constitution  it  is  assessable  to 
some  one. 

Conclusions  and  Recommendations. — 1.  As  stated 
above  the  property  invested  in  insurance  is  taxable  under  the 
general  property  tax,  except  as  it  may  be  in  the  form  of  Ne- 
braska mortgages  and  thus  indirectly  exempt  under  the  mortgage 
tax  law.  It  seems  that  until  the  constitution  is  changed  the 
legislature  is  charged  with  the  duty  of  providing  a  way  of  reach- 
ing this  property.  The  most  direct  way  to  do  so  would  be  to 
impose  the  tax  upon  the  companies  with  the  knowledge  of  course, 
that  it  would  be  borne  by  policy  holders.  It  is  probable  that 
under  the  United  States  Supreme  Court  decisions  all  the  assets 
in  the  form  of  securities  lodged  within  the  State  are  taxable  here, 
but  it  should  be  borne  in  mind  that  these  securities  are  held  in 
trust  for  the  policy  holders,  many  of  whom  reside  outside  the 
State;  and  it  is  doubtful  whether  the  State  should  tax  the  reserves 
except  in  the  proportion  represented  by  resident  poliyy  holders. 
If  the  property-tax  method  is  followed  we  see  no  reason  why 
those  fraternal  organizations  which  accumulate  considerable 
amounts  of  securities,  whatever  the  name  they  are  held  under, 
should  not  be  taxed  exactly  as  other  companies  and  indeed  other 
owners  of  such  are.  But  if  an  effective  way  of  taxing  insurance 
interests  on  the  basis  of  their  property  be  found  the  tax  on  pre- 
mium receipts  should  of  course  be  repealed. 

2.  In  case  the  wide-open  tax  amendment  is  adopted,  the 
legislature  is  left  free  to  take  any  one  of  the  following  courses: 

(1)  It  may  continue  the  plan  of  taxing  the  property  of 
insurance  interests  and  repeal  the  premium  receipts  tax  as  out- 
lined above.  Or  this  plan  may  be  modified  by  the  adoption  of  a 
flat  rate  on  intangibles  recommended  elsewhere  in  this  report. 
As  most  of  the  reserves  are  invested  in  securities  the  effect  would 
be  to  place  the  great  mass  of  insurance  property  in  a  class  paying 
a  low  rate.  In  case  the  legislature  should  deem  it  wise  to  exempt 
securities  altogether,  accumulations  of  insurance  funds  would 
escape  taxation  by  that  path.  Whatever  provisions  are  made  for 
the  taxation  of  securities  generally  should  apply  to  those  held  by 


Conclusions  and  Recommendations  121 

insurance  companies,  unless  some  other  basis  for  taxing  the 
insurance  interests  is  substituted  for  property. 

(2)  Such  a  substitute  might  be  found  by  basing  the  tax  on 
the  gross  income.    This  is  the  way  Wisconsin  taxes  its  domestic 
companies.    The  tax  is  called  "an  annual  license  fee"  for  tran- 
sacting the   insurance   business.     A   domestic   company  pays 

"three  per  centum  of  its  gross  income  from  all  sources  for  the 
year  *****  exepting  those  from  rents  of  real  estate  upon  which 
said  company,  corporation  or  association  has  paid  the  taxes 
assessed  thereon,  and  excepting  also  premiums  collected  outside 
of  the  state  of  Wisconsin,  on  policies  held  by  non-residents  of  the 
state  of  Wisconsin.  In  ascertaining  the  income  upon  which  such 
license  fee  shall  be  computed  as  aforesaid,  no  deduction  shall  be 
made  from  premiums,  whether  paid  in  cash  or  premium  notes, 
on  account  of  dividends  allowed  or  paid  to  the  insured." 

The  personal  property  of  Wisconsin  insurance  companies  is 
exempt.  This  method  of  taxation  has  the  merit  of  simplicity, 
certainty  and  ease  of  administration  and  is  much  to  be  preferred 
to  any  scheme  of  property  tax.  The  taxes  imposed  under  it  in 
Wisconsin  are  complained  of  as  unduly  burdensome.  If  applied 
here  it  would  certainly  greatly  increase  the  taxes  of  Nebraska 
companies.  Thus  one  company  which  in  1913  paid  less  than 
$12,000  on  premiums,  only  a  small  part  of  which  was  paid  in 
Nebraska,  would  have  paid  under  the  Wisconsin  law  more  than 
$30,000.  We  believe  that  such  a  tax  would  constitute  an  undue 
burden  upon  this  interest. 

(3)  A  third  plan  which  would  be  open  to  the  legislature  in 
case  the  amendment  were  adopted  would  be  to  impose  a  premimu 
tax  in  lieu  of  all  other  taxes  except  those  on  real  estate  owned  by 
the  companies.    In  our  opinion  -this,  under  all  the  circumstances 
in  the  case,  furnishes  the  most  satisfactory  method  of  dealing 
with  the  domestic  insurance  companies.    By  placing  the  admini- 
stration of  the  law  in  the  Insurance  Board  this  plan  would  bring 
about  substantial  equality  as   between   domestic  and   foreign 
companies;    it  would  bring  an  increase  of  public  revenue,  and 
this  revenue  would  properly  be  turned  to  state  rather  than  local 
uses.    Without  taking  into  account  the  fraternal  and  other  mutual 
assessment  companies,  the  following  table  based  on  the  business 
in  Nebraska  for  1913  shows  what  the  state  revenue  from  this 
source  would  be.    Not  having  the  amount  of  taxes  paid  locally, 


122  Report  of  Nebraska  Tax  Commission 

we  cannot  show  the  net  results  of  the  proposed  plan;    but  it 
would  certainly  provide  an  increase  of  revenue: 

Premiums      Tax  at  2% 

Domestic  Life  Companies $1,937,131  $38,742 

Stock  Fire  Companies,  Foreign  and 

Domestic 4,409,963  88,199 

Domestic  Accident,  Surety  and 

-    Miscellaneous 408,610  8,172 


Total $6,755,704         $135,113 

To  Summarize. — It  is  recommended  that  the  law  for  the 
taxation  of  foreign  life  accident  and  surety  companies  be  left  as  it 
now  stands  except  that  the  wording  be  changed  to  conform  to  the 
decisions  of  the  court  and  the  practice;  that  foreign  fire  companies, 
and  all  domestic  companies  now  subject  to  taxation  be  subjected 
to  a  tax  of  two  per  cent  upon  their  premium  receipts  in  lieu  of  all 
taxes  upon  their  property  except  real  estate  to  be  assessed  locally, 
and,  in  the  case  of  fire  companies  excepting  the  license  tax  of  $5.00 
permitted  under  section  2525  R.  S.  1913;  that  for  determining 
taxable  premium  receipts  the  law  be  so  written  as  to  show  de- 
finitely what  deductions  from  gross  premiums  may  be  made, 
and  that  all  premium  taxes  shall  be  assessed  by  the  Insurance 
Board  and  paid  into  the  general  fund  of  the  state  treasury. 

IV.      THE    TAXATION    OF   MERCANTILE,    MANUFACTURING   AND 
MISCELLANEOUS    CORPORATIONS 

1.     The   Present   method 

All  Property  Taxable. — The  constitution  requires  that 
"every  person  and  corporation  shall  pay  a  tax  in  proportion  to 
the  value  of  his,  her,  or  its  property  and  franchises."  The  real 
and  personal  property  of  corporations  is  listed  in  the  same  way 
that  the  property  of  individuals  is  listed,  and  as  far  as  can  be 
determined  the  assessment  is  as  full  as  that  of  property  belong- 
ing to  individuals. 

Franchise  Value  to  be  Assessed. — In  addition  to  the  prop- 
erty schedule  the  law  provides  the  corporations  whether  domes- 
tic or  foreign,  shall  furnish  the  assessor  with  information  not 
required  of  other  taxpayers.  The  statement  of  each  corporation 
must  contain  a  declaration  of  "the  true  value  of  its  franchise." 


Provisions  as  to  Shares  of  Stock  123 

Public  utility  corporations  are  further  required  to  give  details 
as  to  capital  stock,  value  of  shares,  dividends  paid,  gross  and  net 
earnings,  intended  no  doubt  to  aid  the  assessor  in  arriving  at  the 
"franchise  value"  of  the  company.  Domestic  corporations, 
other  than  public  utility  companies,  are  supposed  to  fill  out  a 
similar  schedule;  while  foreign  corporations  other  than  public 
utility  companies  are  required  to  furnish  in  addition  to  the 
description  of  its  real  and  personal  property  in  the  county  and 
the  "true  value  of  its  franchise,"  only  the  amount  of  its  gross 
earnings  from  business  in  the  state  and  the  expense  of  transacting 
such  business.  The  law  does  not  specify  how  this  information 
shall  be  used  by  the  assessor;  but  it  is  no  doubt  intended  to  aid 
him  in  some  way  in  carrying  out  that  part  of  the  law  which 
provides  that  he  shall  "assess  to  the  corporation  the  value  of  its 
franchise  in  addition  to  the  assessed  valuation  of  its  tangible 
property." 

As  far  as  can  be  ascertained,  however,  little  or  no  use  is 
made  by  assessors  of  the  information  supplied  in  these  returns, 
except  perhaps  in  the  case  of  public  utility  companies.  As  a 
matter  of  practice,  therefore,  in  the  assessment  of  mercantile, 
manufacturing  and  miscellaneous  corporations,  only  the  tangible 
property  is  reached,  the  "franchise,"  or  "intangible,"  value 
escaping  altogether. 

Provisions  as  to  Shares. — One  other  feature  of  corporation 
taxes  in  the  state  should  be  mentioned  in  this  connection.  Section 
29  of  the  revenue  laws  which  deals  with  the  place  of  listing  per- 
sonal property  provides  that:  "The  capital  stock  and  franchise 
of  corporations  and  persons,  except  as  otherwise  provided,  shall 
be  listed,  *****  where  the  principal  office  or  place  of  bus- 
iness of  such  corporation  or  person  is  located  within  this  state." 
Section  28  provides  that  persons  shall  list  among  other  things 
all  their  "shares  of  stock  of  joint  stock  companies  when  the 
capital  stock  of  such  company  is  not  assessed  in  this  state."  In 
Bressler  v.  Wayne  County,  84  Neb.  774  (1909)  it  was  held  that 
where  the  capital  stock  was  not  assessed  to  the  corporation  it 
was  properly  assessed  to  the  shareholder. 

As  far  as  can  be  determined,  however,  the  stock  of  domestic 
companies  is  not  assessed  to  the  holder  and  it  is  rarely  the  case 
that  it  is  "listed  and  taxed"  at  the  principal  place  of  business. 
It  seems  that  where  a  return  of  capital  stock  is  made  to  the  assessor 


124  Report  of  Nebraska  Tax  Commission 

the  information  is  used  only  as  a  means  of  checking  up  the  tangible 
property  of  the  corporation. 

The  State  Occupation  Fee. — Besides  the  property  taxes 
above  described  corporations  have  since  1909  been  required  to 
pay  an  annual  "occupation  fee,"  proportioned  to  their  capital 
stock.  This  " fee  "  is  paid  by  both  foreign  and  domestic  companies. 
The  rates  under  the  original  act  were  moderate,  ranging  from 
$5.00  for  corporations  having  a  capital  of  $10,000  or  less,  to  $200 
for  those  having  a  capital  in  excess  of  $2,000,000.  Under  these 
rates  the  following  sums  have  been  collected  and  turned  into  the 
state  treasury: 

Year  Ending  Nov.  '30          Occupation  Fees  Penalties        Total 

1909 $39,235.85       $2,010      $41,245.85 

1910 82,776.30         6,480        89,256.30 

1911 62,890.35         3,250        76,140.35 

1912 58,140.95         1,950        60,090.95 

1913 .  .  .  / 58,410.40         1,330        59,740.40 

The  legislature  of  1913  increased  the  rates,  now  called  the 
"annual  fee,"  so  that  the  payment  now  ranges  from  $5.00  to 
$2,500,  the  latter  amount  being  payable  by  corporations  employ- 
ing in  the  state  a  capital  in  excess  of  $25,000,000.  Under  these 
rates  there  will  be  a  substantial  increase  in  the  yield  of  the  tax. 
The  collection  in  the  first  year  amounted  to  about  $90,000.  The 
fee  here  described  is  not  to  be  confused  with  those  fees  required 
of  all  corporations  for  filing  or  amending  articles  of  incorporation. 

It  will  thus  be  seen  that  corporations  are  taxed  in  Nebraska 
mainly  on  the  principle  of  the  general  property  tax,  i.  e.  according 
to  the  value  of  their  property.  The  capital  stock  tax,  under  the 
name  of  an  "occupation  fee,"  is  a  departure  from  the  ad  valorem 
basis,  and  in  taxing  a  few  other  interests  to  be  noted  later  some 
other  basis  than  the  value  of  property  is  taken.  But  with  these 
few  exceptions  the  taxation  of  corporations  is  "by  valuation." 
Unless  the  pending  amendment  to  the  constitution  is  adopted 
the  chief  problem  in  connection  with  the  taxation  of  corporations 
must  remain,  as  it  now  is,  merely  one  of  valuation,  and  more 
particularly  of  assessing  in  some  adequate  way  the  "intangible 
values"  not  represented  by  tangible  property.  This  leads  us 
to  a  brief  consideration  of  methods  employed  in  taxing  the 
' '  franchise ' '  so-called . 


Methods  of  Taxing  the  "Franchise"  125 

2.     Methods  of  Taxing  the  "Franchise" 

Nature  of  the  Problem;  Its  Difficulty. — The  meaning  of 
the  term  "franchise"  as  an  object  of  taxation  is  indefinite.  When 
used  of  a  public  service  corporation  in  its  narrow  sense  it  is 
understood  to  mean  the  value  of  the  rights  granted  by  the  govern- 
ment— as  e.  g.  the  right  to  occupy  the  streets  for  traffic  purposes, 
the  right  to  plant  poles  and  string  wires,  make  conduits,  or  lay 
gas  pipes.  A  right  granted  to  an  individual  to  do  any  of  these 
things  would  of  course  be  as  much  a  franchise  in  his  possession  as 
though  owned  by  a  corporation.  But  the  term  has  a  wider 
application  than  this  for  purposes  of  taxation.  It  includes  all 
those  elements  in  the  total  value  of  a  concern  which  represent 
the  earning  power  of  the  business,  not  covered  by  the  tangible 
property  employed.  In  general  usage,  it  means  the  difference 
between  the  total  value  of  the  concern  and  the  value  of  its  tang- 
ible assets.  As  defined  by  the  state  supreme  court  the  words 
"franchise  value"  used  in  a  broad  sense  "really  mean  the  value 
of  the  intangible  property  *  *  *  .  This  intangible  property 
possesses  value  and  is  capable  of  valuation  for  purposes  of  taxa- 
tion. Western  Union  Telegraph  Co.  v.  City  of  Omaha,  73,  Neb. 
527,  539. 

An  attempt  is  made  under  the  present  law  to  reach  this 
intangible  value,  though  usually  in  practice  without  much  suc- 
cess. For  example  the  shares  of  bank  stock  are  taxable  at  their 
market  value  which  is  usually  in  excess  of  the  book  value  repre- 
senting the  funds  put  into  the  business  by  the  share  holders. 
A  better  example  is  found  in  the  taxation  of  express,  telegraph 
and  telephone  companies.  The  value  of  the  tangible  property 
in  these,  as  in  many  other  cases,  is  a  poor  index  of  taxrpaying  abil- 
ity. The  legislature  of  1903,  apparently  seeking  to  maintain 
the  appearance  of  taxing  these  interests  "by  valuation,"  but  not 
content  with  the  tangible  property  as  an  adequate  basis,  pro- 
vided as  shown  elsewhere  that  to  the  value  of  real  and  personal 
property  should  be  added  the  gross  receipts  for  the  past  year, 
such  gross  receipts  to  be  considered  as  an  item  of  property,  and 
to  "represent  the  franchise  valuation  which  shall  not  be  other- 
wise assessed."  This  crude  method  of  valuing  the  franchise  has 
been  declared  void  by  the  courts.  In  the  taxation  of  other  public* 
service  corporations  the  means  are  provided,  through  the  returns 


128  Report  of  Nebraska  Tax  Commiseion 

required,  for  reaching  the  intangible  value,  though  no  definite 
rule  is  laid  down  for  doing  so.  This  seems  to  be  quite  effectively 
done  in  the  case  of  the  railroads.  The  State  Board  of  Equaliza- 
tion and  Assessment  finds  this  element  in  the  railroad  values  of 
the  state  to  exceed  $100,000,000. 

2.  Taxing  t  the  "Corporate  Excess/' — Systematic 
methods  have  been  developed  in  some  of  the  states  for  assessing 
franchise  value,  (a)  In  Illinois  the  duty  of  determining  the 
intangible  value  of  corporations  rests  with  the  State  Board  of 
Equalization.  The  intangible  value,  called  the  "corporate 
excess,"  is  reported  back  to  the  local  authorities  where  the 
tangible  property  is  found  and  taxed  at  the  same  rate  as  other 
property  for  local  purposes.  The  law  seems  never  to  have  been 
very  effectively  administered  probably  in  large  part  due  to  the 
constitution  of  the  Board  of  Equalization.  The  method  of  taxing 
the  Corporate  Excess,  followed  in  a  general  way  in  Illinois,  was 
first  adopted  in  Massachusetts  and  has.  there  attained  its  fullest 
development. 

(b)  Massachusetts  has  had  a  well  defined  method  of  reaching 
the  intangible  value  of  corporations  since  1864.  In  recent  years 
the  method  has  undergone  important  changes  but  the  essentials 
of  the  original  plan  are  still  retained.  The  tangible  property  is 
assessed  at  its  situs  by  the  local  assessor  for  purposes  of  local  taxa- 
tion. The  valuation  is  also  reported  to  the  State  Tax  Commissioner. 
The  corporation  makes  a  report  to  the  Commissioner,  giving  such 
information  as  to  capital  stock,  earnings,  expenses,  dividends,  etc. 
as  will  enable  one  skilled  in  corporation  accounts  to  determine 
the  market  value  of  the  capital  stock.  From  this  total  value  is 
deducted  the  sum  of  the  local  assessments,  as  also  the  value  of 
tangible  property  located  outside  the  state.  Ihe  remainder 
constitutes  the  "corporate  excess  "which  is  taxed  at  the  average 
tax-rate  for  the  state.  Property  which  the  assessor  is  usually 
not  able  to  value  with  substantial  accuracy,  like  stocks  of  goods, 
is  not  assessed  locally  under  the  present  law  but  its  value  appears 
in  the  "corporate  excess"  as  found  by  the  Commissioner.  Shares 
in  the  hands  of  the  owner  are  of  course  not  taxable,  but  bonds  of 
corporations  are,  when  found,  assessed  to  the  owner. 

The  distribution  of  the  tax  on  the  "corporate  excess"  has 
undergone  some  changes  during  the  last  few  years.  The  tax  is 


Taxing  the  "Corporate  Excess"  127 

paid  into  the  state  treasury.  That  portion  of  the  tax  represented 
by  non-resident  ownership  is  retained  for  state  purposes.  Form- 
erly the  remainder  of  the  tax  was  turned  over  to  the  towns  on  the 
basis  of  residence  of  the  stockholder;  and  this  is  still  the  method 
of  distributing  the  tax  arising  from  public  service  corporations; 
but  that  arising  from  "business  corporations/'  like  those  engaged 
in  mercantile  and  manufacturing  businesses,  is  turned  over  to 
the  town  or  towns  where  the  -property  of  the  corporation  is 
located. 

The  following  table  shows  the  source,  amount  and  distribu- 
tion of  the  tax  for  1912: 

Accruing  to       Distributed  to 
Commonwealth  Cities  and  Towns 

Street  railways $14,892          $1,181,054 

Other  public  service  corporations  .   1,670,729  2,690,640 

Business  corporations 632,778  2,903,603 

Trust  property. .  9,227  34,555 


Total $2,327,627          $6,809,853 

(c)  In  1911  Rhode  Island  enacted  a  law  designed  to  reach 
this  intangible  value  in  corporations.  It  differs  from  the  Mas- 
sachusetts law  in  several  important  respects.  (1)  It  does  not 
apply  to  public  service  corporations,  these  being  taxed  on  the 
basis  of  their  gross  earnings.  (2)  Not  only  the  capital  stock  is 
considered  in  arriving  at  the  value  of  a  corporation  but  to  this 
is  added  the  bonded  indebtedness  and  all  other  indebtedness 
which  represents  investment  or  "is  a  cover  for  a  division  of 
profits."  Neither  the  bonds  nor  the  shares  are  taxable  to  the  holder. 
(3)  From  the  total  value  thus  found  are  deducted  the  assessed 
value  of  real  estate  and  tangible  personal  property,  and  the 
value  of  such  property  as  is  by  law  exempt  from  taxation.  The 
remainder  constitutes  the  "corporate  excess/'  for  the  taxation 
of  the  corporation.  (4)  The  rate  on  this  intangible  value  is  the 
same  as  that  on  intangible  personalty — such  as  money  and 
credits — in  the  hands  of  individuals,  i.  e.  four  mills  on  the  dollar 
of  valuation. 

In  both  Massachusetts  and  Rhode  Island  the  law  for  taxing 
"corporate  excess"  has  proven  successful.  Difficulties  of  course 
arise  in  determining  the  value  of  shares  not  listed  on  the  exchanges 
but  these,  it  is  claimed,  are  successfully  met  by  the  well  organized 


128  Report  of  Nebraska  Tax  Commission 

corps  of  officials  charged  with  the  administration  of  the  law.  It 
is  agreed  on  all  hands  that  this  method  however  well  worked 
out  on  paper  would  fail  as  our  own  present  method  does,  but 
for  the  highly  efficient  central  administration  of  the  tax. 

2.  More  Effective  Method  of  Reaching  the  Intangible 
Value  of  Corporations  Needed  in  Nebraska. 

Why  Intangible  Values  Should  be  Assessed. — It  should 
be  noted  that  the  plans  followed  by  Massachusetts  and 
Rhode  Island  do  not  involve  any  new  principle  in  taxation. 
They  are  simply  effective  methods  of  taxing  according  to  value. 
Their  novelty  is  that  they  furnish  a  means  of  making  a  full  and 
accurate  assessment  of  the  property  of  corporations  and  of 
taxing  it  once  and  only  once.  If  such  a  plan  were  adopted  in 
Nebraska  it  would  be  an  effective  method  of  doing  what  the 
constitution  and  the  law  now  require  to  be  done,  but  for  doing 
which  no  adequate  rules  or  machinery  are  provided.  It  would, 
if  efficiently  administered,  each  a  great  mass  of  property  not 
now  taxed,  and  would  bring  about  a  fairer  adjustment  of  the 
tax  burden.  As  Mr.  Justice  Brewer  has  well  said : 

"In  the  complex  civilization  of  today  a  large  portion  of  the 
wealth  of  a  community  consists  in  intangible  property.  ****** 
*  *  *  To  ignore  this  intangible  property  or  to  hold  that  it  is  not 
subject  to  taxation  at  its  accepted  value  is  to  eliminate  from  the 
reach  of*the  taxing  power  a  large  portion  of  the  wealth  of  the 
country.  To  say  that  there  is  no  such  intangible  property,  that 
it  is  something  of  no  value,  is  to  insult  the  common  intelligence 
of  every  man.  It  is  a  cardinal  rule  which  should  never  be  for- 
gotten that  whatever  property  is  worth  for  the  purposes  of  income 
and  sale  it  is  also  worth  for  purposes  of  taxation.  Accumulated 
wealth  will  laugh  at  the  crudity  of  taxing  laws  which  reach  only 
the  one  (tangible)  and  ignore  the  other  (intangible)  while  they 
who  own  tangible  property  not  organized  into  a  single  producing 
plant  will  feel  the  injustice  of  a  system  which  so  misplaces  the 
burden  of  taxation."  Adams  Express  Co.  v.  Ohio,  166  U.  S. 
185,  218. 

This  argument  was  made  in  connection  with  a  business  in 
which  the  intangible  value  is  unusually  large  but  it  applies  to  all 
businesses  whether  the  intangible  value  is  large  or  small.  The 
reasoning  has  been  accepted  by  the  supreme  court  of  this  state 
in  numerous  cases;  the  law  as  interpreted  is  clear  and  the  demands 
of  justice  no  less  so,  that  the  non-physical  as  well  as  physical 
property  must  be  included  in  the  assessment. 


The  Question  of  Discrimination  129 

The  Question  of  Discrimination. — It  may  be  argued, 
however,  that  corporate  property  should  be  taxed  on  the  same 
basis  as  that  of  individuals  and  copartnerships,  and  that  it  would 
be  a  discrimination  against  the  corporate  form  of  business  organ- 
ization to  adopt  a  method  of  accurate  assessment  for  corpora- 
tions that  may  not  be  applied  to  natural  persons  and  firms.  This 
argument  was  put  to  a  member  of  the  Rhode  Island  Commission, 
who  speaking  for  himself  and  not  the  commission  said : 

"Your  apparent  objection  to  the  taxation  of  the  intangible 
value  of  corporations  by  a  positive  method  while  the  method  of 
taxing  is  so  ineffective  that  much  of  their  intangible  value  escapes, 
does  not  seem  to  me  to  be  very  serious.  If  nothing  is  to  be  taxed 
until  everything  else  is  equitably  assessed,  I  am  afraid  there  will 
be  a  shortage  of  considerable  proportions  in  both  state  and  local 
revenues,  and  the  principle  of  taxation  at  the  source  must  be 
abandoned/' 

It  is  not  the  purpose  of  such  a  plan  of  assessment  as  that 
under  consideration  to  discriminate  between  classes  of  property 
holders.  If  any  discrimination  should  arise  it  would  be  incidental 
in  the  process  of  administration.  As  a  matter  of  fact,  the  legisla- 
ture, clothed  with  power  to  determine  the  method  of  valuation, 
has  already  provided  for  different  methods  for  different  classes 
of  property.  The  most  striking  example  of  departure  from  the 
usual  method  of  assessment  is  found  in  the  case  of  the  railroads. 
They  are  assessed,  as  they  should  be,  by  a  central  authority 
supplied  with  ample  data  for  effectively  reaching  the  intangible 
value;  thus  making  possible  equality  of  treatment  for  the  various 
roads.  No  one  thinks  of  lessening  the  efficiency  of  the  machinery 
for  assessing  railroad  property  simply  because  all  property  can- 
not be  assessed  by  the  same  method  or  with  equal  accuracy. 
Again  the  law  requires  bank  stock  to  be  assessed  at  its  market 
value.  Where  this  is  done  accurately  it  results  in  a  higher  pro- 
portionate valuation  than  is  given  to  other  property,  for  it  reaches 
what  may  be  called  the  intangible  value  of  the  business  in  excess 
of  the  funds  put  into  the  enterprise  represented  by  the  paid  up 
capital,  surplus,  and  undivided  profits.  Moreover  the  method 
of  collecting  at  the  source  leaves  no  chance  for  the  stockholder 
in  this  class  of  corporation  to  avoid  the  tax.  The  legislature  has 
not,  however,  provided  the  machinery  for  effective  administra- 
5 


130  Report  of  Nebraska  Tax  Commission 

tion;  for  the  local  assessor,  not  able  to  determine  the  true  value, 
generally  accepts  book  value  as  the  basis  of  assessment. 

These  facts  are  adduced  not  to  justify  "discrimination"  but 
to  show  that  it  exists  under  the  present  law  as  an  incident  to  the 
different  methods  of  valuation  provided  by  the  legislature.  We 
may  go  farther  and  hold  that  as  a  matter  of  fact  "discrimination" 
of  flagrant  form  is  inseparable  from  the  ad  valorem  method  of 
taxation  unless  it  is  administered  in  such  a  way  as  to  reach  in- 
tangible as  well  as  tangible  property.  Suppose  we  take  two 
factories  with  exactly  the  same  equipment  but  one  prosperous 
making  the  business  pay  say  20  per  cent  on  the  investment,  the 
other  barely  maintaining  itself  on  3  or  4  per  cent  earnings.  Only 
those  blinded  by  the  narrowest  conception  of  the  ad  valorem 
system  would  argue  that  the  two  concerns  should  contribute  the 
same  for  the  support  of  government.  To  require  it  violates  the 
most  fundamental  of  the  principles  of  taxation — that  of  equality. 
It  has  been  argued  before  the  commission  that  business  ability, 
successful  management,  industry,  integrity,  good-will,  ought 
not  to  be  taxed.  But  if  we  were  as  familiar  with  the  method  of 
taxing  according  to  income  as  we  are  with  taxation  by  valuation, 
the  flimsiness  of  such  a  contention  would  be  apparent.  If  justice 
requires  that  income  arising  from  skill  or  other  personal  qualities 
be  taxed,  it  equally  requires  that  the  intangible  value  found  in 
a  going  concern,  whatever  be  its  source,  since  it  represents  earn- 
ing power,  should  be  included  in  the  valuation  of  the  concern. 

The  argument  that  the  assessment  of  intangible  value  to 
corporations  would  constitute  a  discrimination  against  the  cor- 
porate form  of  organization,  ignores,  therefore,  the  important 
fact  that  the  assessment  of  tangible  property  only  involves  in 
itself  a  flagrant  discrimination  in  favor  of  the  more  prosperous 
corporations  as  against  the  less  prosperous;  it  involves  discrim- 
ination in  fact  against  all  forms  of  property,  like  that  used  for 
residence  purposes,  to  which  no  intangible  value  attaches.  The 
aim  should  of  course  be  to  reach  the  full  value  of  the  property  of 
individuals  and  corporations  alike.  But  because  this  cannot  be 
done  in  all  cases  is  no  reason  for  doing  it  in  no  case.  No  state 
can  afford  deliberately  to  adopt  the  policy  of  making  all  parts  of 
its  taxing  machinery  as  inefficient  as  it  is  at  the  weakest  point. 
The  contrary  policy  should  be  followed  of  making  the  assessment 
accurate  wherever  it  can  be  made  so.  If  an  effective  method 


Administrative  Requirements  131 

of  assessing  corporations  were  adopted,  it  ought,  under  proper  con- 
trol, to  bring  about  a  fuller  assessment  of  other  property.  This 
was  the  result  in  Wisconsin  where  the  tax  commission  was  given 
power  to  assess  railway  property. 

Administrative  Requirements. — This  leads  to  another 
important  aspect  of  the  subject,  that  of  administration.  Unless 
the  state  is  ready  to  provide  for  a  strong  central  administration 
of  the  whole  tax  system  and  especially  for  the  assessment  of 
corporations,  there  is  no  use  considering  any  plan  for  reaching  the 
intangible  value  of  corporations.  Local  assessors  are  powerless 
to  administer  such  a  plan.  Where  it  has  succeeded  the  success 
has  been  due  to  skillful  administration  by  a  strong  central  au- 
thority. 

The  question  may  be  raised  whether  the  fact  that  Nebraska 
corporations,  though  numerous,  are  small,  stands  in  the  way  of 
adopting  an  effective  method  of  reaching  their  intangible  prop- 
erty. This  question  was  put  to  officers  charged  with  the  admin- 
istration of  the  Corporate  Excess  law  in  other  states.  Their 
judgment  is  that  the  law  operates  as  effectively  and  fairly  where 
small  corporations  are  concerned  as  where  large  ones  are  con- 
cerned. 

Is  the  State  Occupation  Tax  a  Bar? — Does  the  fact  that 
we  now  have  in  the  Potts  law  a  capital  stock  tax  in  form  of  an 
"occupation  fee,"  stand  in  the  way  of  adopting  the  Rhode  Island 
method  here?  In  our  opinion  it  does  not.  The  only  merit  of  that 
tax  is  that  it  is  simple  and  easily  administered.  It  rests  on  no 
sound  principle  of  taxation.  It  is  a  convenient  way  of  securing  a 
slight  increase  of  revenue,  pin  money  we  might  say,  but  an  attempt 
to  raise  any  considerable  sum  by  it  would  probably  lead  to  its 
breakdown.  The  same  tax  is  levied  upon  corporations  having 
equal  issues  of  stock  regardless  of  its  value,  and  regardless  of  the 
amount  of  bonds  outstanding.  While  the  tax  is  simple  in  itself, 
it  introduces  complexity  into  the  scheme  of  taxing  corporations. 
If  desired  it  might  be  retained,  as  long  as  the  rates  are  kept  low 
though  we  see  no  reason  for  doing  so.  It  is  a  business  tax,  not  a 
property  tax;  and  in  no  wise  takes  the  place  of  the  tax  on  any 
part  of  a  corporation's  property. 

Conclusions  and  Recommendations. — Our  conclusion  is 
that  a  more  effective  method  of  assessing  corporations  should  be 
provided  for  in  Nebraska.  We  have  made  recommendations 


132  Report  of  Nebraska  Tax  Commission 

elsewhere  that  all  public  service  corporations  be  assessed  by 
a  central  board.  We  believe  that  mercantile  manufacturing  and 
miscellaneous  corporations  should  be  assessed  by  the  same  au- 
thority. Inasmuch  as  the  values  designed  to  be  reached  by  this 
change  are  intangible  in  character  there  seems  gocd  reason  for 
treating  them,  as  is  done  in  Rhode  Island,  in  the  same  way  that 
intangible  property  is  treated.  Thus  if  a  flat  rate  is  provided 
for  intangible  property,  it  should  also  be  applied  to  the  corporate 
excess.  If  the  present  constitutional  provisions  remain,  the 
legislature  will  be  required  to  provide  a  means  of  valuing  the 
"franchise/'  and  no  other  way  is  left  open  but  to  tax  it  at  the 
general  property  tax  rate.  There  is  nothing  in  the  economic 
character  of  the  tax  to  mark  it  as  a  state  tax  though  in  some 
states  it  is  turned  to  state  purposes.  Unless  it  is  deemed  desirable 
to  adopt  a  plan  of  separation  of  sources,  in  which  case  the  cor- 
porate excess  tax  will  be  needed  to  supply  the  state's  needs,  the 
values  found  should  be  certified  back  to  the  local  governments  as 
a  basis  for  local  taxes. 


Separation  of  Sources  of  Revenue  133 


CHAPTER  VII 

THE  SEPARATION  OF  SOURCES  OF  REVENUE 

In  search  for  a  way  of  escape  from  some  of  the  evils  the 
general  property  tax,  a  number  of  students  of  public  finance 
have  advocated  the  plan  of  separating  the  sources  of  revenue 
for  state  and  for  local  purposes.  The  plan  has  been  frequently 
commended  to  this  Commission  though  not  always  upon  full 
consideration  of  the  problems  involved.  It  has  been  urged  that 
as  between  the  state  and  federal  governments  this  principle  is 
observed  and  it  ought  to  be  carried  further  by  giving  the  state 
its  own  special  sources  of  income  and  reserving  others  to  the 
counties  and  minor  civil  divisions.  In  some  states  this  end  has 
been  attained  without  any  conscious  effort  at  segregation,  but 
as  an  incident  to  providing  more  effective  administration.  In 
others  it  has  been  consciously  aimed  at  as  the  most  direct  means 
of  securing  an  equitable  apportionment  of  the  tax  burden. 

Separation  of  sources  is  advocated  for  six  chief  reasons: 
(1)  That  there  is  a  natural  distribution  of  functions  between 
the  state  and  local  governments  and  the  tax  system  should  be 
made  to  conform  to  this  distribution;  (2)  that  it  is  the  only 
effective  remedy  for  the  evils  of  under- valuation;  (3)  that  the 
imposition  of  state  levies  upon  the  same  valuations  as  are  used 
for  the  local  levies  creates  too  heavy  a  burden  upon  that  base; 

(4)  that  property  values  may  be  localized  in  such  a  way  as  to 
give  an  undue  advantage  to  those  communities  possessing  them; 

(5)  that  it  is  a  necessary  step  toward  giving  local  autonomy  in 
tax  matters;   and  (6)  that  it  will  make  it  possible  to  place  each 
tax  in  the  hands  of  that  branch  of  government  which  can  best 
administer  it.    We  shall  consider  each  of  these  in  turn. 

1.  Apportionment  According  to  Function. — The  prin- 
ciple of  apportioning  revenues  to  the  several  governments  in 
accordance  with  the  functions  they  perform  is  best  set  forth  in 
the  report  of  the  California  Commission  on  Revenue  and  Taxa- 
tion for  1906.  The  argument  may  be  summarized  as  follows: 

The  activities  of  the  local  governments,  such  as  the  protection 
of  life  and  property  by  the  police,  the  fire  departments,  the  local 


134  Report  of  Nebraska  Tax  Commission 

courts,  the  construction  and  maintenance  of  roads,  streets, 
bridges  and  the  like,  the  provision  for  schools,  the  care  of  poor 
and  the  like  redound  distinctly,  directly  and  peculiarly  to  the 
benefit  of  local  property  owners  and  local  industries  and  enhance 
and  sustain  the  value  of  real  estate  and  of  other  tangible  property 
in  the  localities.  This  has  always  been  the  ground  for  making 
local  government  expenses  a  local  charge.  Separation  makes  no 
change  in  this  respect,  but  it  does  propose  to  relieve  local  property 
from  state  taxes  and  from  the  expenses  of  general  activities,  the 
benefits  of  which  are  not  directly  traceable  to  the  activities  of 
the  local  government.  It  seems  peculiarly  fitting  that  local  in- 
dustries like  agriculture  should  bear  the  expense  of  their  own 
protection,  and  support  the  local  charges.  There  is  probably  no 
better  way  of  apportioning  the  taxes  among  a  group  of  farmers 
for  the  support  of  local  government  than  by  the  taxation  of  real 
estate.  The  property  tax  originated  as  a  neighborhood  tax,  and 
works  best  when  used  as  such.  In  cities,  generally,  it  is  the  growth 
of  the  community  that  gives  value  to  real  estate.  It  seems  proper 
that  such  property  should  bear  the  greater  part  of  the  expenses 
of  the  city  which  creates  its  value. 

On  the  other  hand  the  activities  of  the  state  are  broad  and 
general.  Its  duties  are  mainly  legislative.  It  provides  the  laws 
under  which  business  is  conducted,  corporations  chartered, 
institutions  in  no  wise  local  are  maintained.  In  general  it  cares 
for  all  those  interests  too  broad  or  too  large  for  the  local  govern- 
ments to  handle.  These  general  activities  suggest  as  the  proper 
sources  of  revenue  to  support  them,  the  public  service  corporations 
such  as  railroads,  the  telegraph,  telephone  and  express  companies, 
and  the  banks,  whose  business  is  in  no  sense  confined  to  one 
locality.  These  industrial  corporations  are  the  creatures  of  the 
state,  and  it  is  by  the  state  they  are  regulated  and  controlled. 
They  serve  the  people  of  the  state  as  a  whole,  and  do  not  benefit, 
except  as  to  their  local  franchises,  in  the  same  peculiar  and  direct 
manner  as  does  private  individual  real  estate,  by  the  activities 
of  the  local  government. 

While  the  theory  here  presented  has  much  to  support  it,  in 
a  general  way,  it  may  well  be  doubted  whether  there  is  so  distinct 
a  division  between  the  functions  of  state  and  local  government 
as  to  make  an  exact  basis  for  separating  the  revenues  as  is  here 
assumed.  The  state  of  California  was  not  able  to  apply  it  with 
any  exactness.  Thus  while  it  may  be  true  that  some  banks 
serve  wide  districts,  possibly  the  whole  state,  many  others  per- 
form a  purely  local  service,  .yet  the  bank  taxes  are  by  the  Cali- 
fornia law  turned  into  the  state  treasury.  It  would  seem  that 
the  street  car  companies  ought  according  to  the  theory  to  be 


Separation  to  Avoid  Under-valuation  135 

subject  to  local  taxation,  yet  their  taxes  also  were  turned  into  the 
state  treasury,  because,  as  has  been  explained,  it  was  only  fair 
that  the  cities  should  give  up  this  source  of  revenue  as  an  offset 
to  the  surrender  of  the  railroad  taxes  by  the  rural  districts. 

2.  Separation  to  Avoid  Under-valuation. — The  argu- 
ment most  frequently  urged  for  segregation  is  the  practical  one 
that  a  fair  assessment  cannot  be  had  under  the  present  system 
of  apportioning  state  taxes  to  the  counties  in  proportion  to 
valuation.  Here  is  confessedly  one  of  the  most  obvious,  persis- 
tent, and  universal  defects  in  the  tax  system.  All  efforts  to  remedy 
the  evils  of  under-valuation  through  equalizing  boards  have  been 
unavailing;  it  is  now  proposed  to  remove  the  motive  for  under- 
valuation by  giving  the  state  an  independent  source  of  income 
and  this  as  is  supposed  makes  the  assessment  of  property  a 
matter  of  purely  local  concern.  This  plan  has  been  advocated 
before  the  Commission  by  farmers  on  the  ground  that  they  are 
compelled  under  the  present  plan  to  pay  an  unfair  share  of  the 
state  tax  because  of  the  concealment  of  large  masses  of  property 
in  the  cities,  and  segregation  is  expected  to  give  them  relief. 

This  argument  assumes  that  if  the  assessment  in  each  county 
could  be  fairly  made  the  objections  to  the  present  plan  of  appor- 
tioning the  state  tax  would  be  removed.  The  state  charges  to 
each  county  such  a  part  of  the  total  state  tax  to  be  raised  as  its 
valuation  is  part  of  the  total  valuation.  This  in  turn  is  collected 
from  the  taxpayers  in  each  county  in  proportion  to  their  in- 
dividual assessments.  The  state  tax  in  fact  is  so  many  mills  on 
the  dollar  of  assessed  value  of  each  person's  property  and  rests 
on  the  same  theoretical  basis  as  the  local  taxes:  Each  person 
is  expected  to  pay  a  state  tax  according  to  his  ability,  measured 
by  the  value  of  his  possessions,  just  as  his  local  taxes  are. 

Several  important  questions  are  raised  by  this  branch  of  the 
argument  for  segregation.  Would  the  motives  which  lead  to 
a  poor  assessment  be  swept  away  by  separation?  What  effect 
would  the  plan  have  upon  the  character  of  local  assessments? 
Can  such  assessments  under  any  circumstances  be  regarded  as 
a  matter  of  purely  local  concern?  Have  we  exhausted  the  means 
of  securing  a  fair  valuation  as  between  counties?  These  ques- 
tions were  discussed  by  Mr.  T.  S.  Adams  now  a  member  of  the 


136  Report  of  Nebraska  Tax  Commission 

Wisconsin  State  Tax  Commission  in  an  address  before  the  Na- 
tional Tax  Association  in  1907,  as  follows : 

"The  influences  or  factors  responsible  for  inefficient  assess- 
ment work  are  so  numerous,  that  the  desire  to  evade  state  taxes 
is  really  a  negligible  consideration.  Enumerate  these  factors: 
first,  the  inherent  difficulties  of  the  task;  next,  the  political 
atmosphere  in  which  the  assessor  too  often  works;  then,  the 
insufficient  time,  insufficient  pay,  desire  to  evade  county  taxation, 
desire  to  favor  personal  friends  and  political  associates — enumer- 
ate these  factors,  and  it  is  plain,  without  reference  to  experience, 
that  the  mere  discontinuance  of  state  taxation  of  general  property 
can  work  no  appreciable  improvement.  If  reference  to  experience 
is  needed,  I  can  only  say  that  the  practical  separation  accomp- 
lished in  Wisconsin  has  not,  in  the  opinion  of  those  best  qualified 
to  judge,  exerted  any  appreciable  influence  upon  the  character 
of  the  assessment  work.  There  is  the  same  old  struggle  over  the 
county  equalization,  the  same  old  strife  between  city  and  county, 
the  same  old  scramble  of  the  individual  taxpayer  to  get  from  under 
the  local  assessment. 

How  could  it  be  otherwise?  Of  the  general  property  taxes— 
$706,660,244  in  all— collected  in  this  country  in  1902,  only 
$83,320,134,  or  11.6  per  cent,  went  to  the  state  governments, 
while  $624,340,110,  or  88.4  per  cent,  went  to  the  counties,  cities, 
and  other  local  divisions.  These  figures  furnish  a  good  measure 
of  the  part  which  the  desire  to  escape  state  taxes  plays  in  de- 
moralizing local  assessors.  The  counties  alone  collected  nearly 
75  per  cent  more  under  the  general  property  tax  than  the  states. 
If  the  state  governments  should  abandon  the  $83,320,134  which 
they  now  are  (or  were  in  1902)  levying  on  general  property,  there 
would  still  remain  $624,340,110  to  be  distributed  and  equalized 
among  the  taxpayers  of  the  local  divisions.  For  the  state  govern- 
ment to  abandon  this  greater  task  of  equalization  is  a  cowardly 
evasion  of  its  chief  duty."  State  and  Local  Taxation,  I,  522. 

The  relative  importance  of  the  state  taxes  in  Nebraska  is  at 
present  somewhat  greater  than  for  the  county  as  a  whole  in  1902. 
In  1913  of  $22,487,791  levied  on  the  value  of  property  for  all  the 
governments,  $3,671,385  was  for  state  purposes  and  $18,816,406 
for  local  purposes;  that  is  83.6  per  cent  of  the  ad  valorem  taxes 
were  for  local  purposes.  The  state  levy  was  in  1913  7.8  mills; 
the  average  for  various  counties,  including  the  state  levy,  ranged 
from  25.65  to  60.76  mills  and  the  average  for  all  counties  was 
47.25  mills.  If  the  recom.m.endations  of  the  Commission  for 
turning  certain  taxes  over  to  the  state  are  adopted,  the  local 
taxes  will  become  relatively  greater.  We  believe  that  any  plan 


Separation  to  Avoid  Under-valuation  137 

of  reform  that  leaves  to  the  local  assessors  a  practically  free  hand 
in  determining  how  this  great  sum  shall  be  apportioned  among 
the  taxpayers  of  the  county,  as  is  now  the  case,  will  fail  of  its 
purpose.  It  is  Utopian  to  proceed  on  the  theory  that  the  difficul- 
ties of  valuation  will  be  lessened,  or  the  motives  for  unfair  assess- 
ments materially  decreased,  by  separation.  It  is  equally  Utopian 
to  argue  that  when  made  a  local  matter  the  people  of  each  com- 
munity will  look  after  their  own  interests  and  correct  any  evils 
that  appear  in  the  assessments.  Experience  shows  that  they 
will  not,  that  state  supervision  is  required  whether  there  is  sepa- 
ration or  not.  The  Minnesota  Tax  Commission  has  found  many 
cases  where  the  inequalities  between  townships  in  the  same  county 
had  been  passed  over  by  the  county  board  and  have  themselves 
equalized  or  ordered  reassessments.  In  some  cases  the  county 
board  has  called  the  state  to  its  aid.  This  practice  prevails  in 
Kansas.  In  New  York  where  till  recently  there  was  complete 
separation  of  sources  the  local  assessment  has  been  thus  described 
by  Mr.  C.  J.  Tobin,  Assistant  Secretary  of  the  State  Board  of 
Tax  Commissioners: 

"It  should  be  remembered  also  that  there  has  been  no 
centralized  control  in  taxation,  so  that  each  locality  has  been  a 
law  unto  itself  with  the  result  that  there  has  been  continuous 
exertion  on  the  part  of  each  to  compete  in  the  race  for  approval 
by  a  showing  of  efficiency.  The  goal  has  been  ever  for  a  lowering 
in  the  tax  rate  as  compared  with  some  other  county  in  the  fear 
of  a  state  tax  and  in  any  event  as  compared  with  some  other 
town  in  the  county  on  account  of  the  county  tax  to  which  each 
town  must  contribute." 

The  argument  for  separation  on  the  ground  that  state 
equalization  has  failed  is  not,  therefore,  on  closer  examination, 
fully  convincing.  Administration  is  faulty  in  this  state  as  it  has 
been  in  others.  But  we  have  by  no  means  exhausted  the  possi- 
bilities of  improvement.  The  equalization  of  a  faulty  initial 
assessment  is  confessedly  a  more  or  less  futile  undertaking.  But 
give  to  a  permanent  state  board  of  tax  commissioners  a  direct 
control  over  local  assessments  such  as  we  recommend  elsewhere, 
give  to  county  and  state  equalizing  boards  adequate  information 
as  to  the  character  of  the  property  they  are  to  equalize  and  the 
glaring  inequalities  will  be  greatly  reduced  if  not  eliminated. 


138  Report  of  Nebraska  Tax  Commission 

3.     Separation    as    a    Step    Toward    Local    Option. 
Separation  is  advocated  on  another  and  quite  different  ground, 
namely,  that  it  would  make  possible  the  application  of  the  prin- 
ciple of  "local  option"  in  matters  of  taxation. 

"LOCAL  OPTION"  OR  "HOME  RULE"  in  taxation  has  re- 
ceived considerable  attention  at  the  hands  of  students  of  the 
subject  during  the  last  few  years.  Advocates  of  the  principle 
hold  that  the  local  governments  should  be  clothed  with  power 
to  determine,  to  a  greater  or  less  extent,  the  objects  and  the 
methods  of  taxation  within  their  borders.  It  is  argued  that 
industrially  and  socially  communities  differ  widely  and  that  a 
tax  system  suited  to  one  community  may  be  wholly  unsuited 
to  another.  These  differences  are  most  marked  as  between  city 
and  rural  districts.  Why  should  they  be  compelled  to  live  under 
the  same  revenue  system?  Moreover,  each  community  is  held  to 
be  a  better  judge  of  the  best  means  of  raising  revenue  within  its 
borders  than  the  legislature  can  be,  and  that  it  should  have  a 
right  to  exercise  its  judgment.  The  assumption  is,  sometimes 
expressed  more  often  implied,  that  the  revenue  system  in  one 
locality  is  a  matter  of  no  concern  to  other  localities.  In  fact 
variety  is  desirable  and  the  experiments  thus  permitted  would 
lead  to  adoption  finally  of  those  methods  and  sources  best  adapted 
to  the  character  of  the  community. 

These,  we  believe,  are  the  chief  arguments  for  local  option  in 
taxation.  That  there  is  much  merit  in  them  can  hardly  be  denied. 
But  as  usual  in  such  matters  there  are  disadvantages  as  well  as 
advantages  connected  with  the  scheme.  No  appeal  can  be  made 
to  recent  experience  as  to  the  operation  of  the  principle.  The 
whole  tendency  in  modern  times  has  been  away  from  local  au- 
tonomy in  matters  of  taxation  and  in  the  direction  of  centralized 
control.  Some  moves  have  been  made  toward  decentralization, 
but  they  have  as  yet  yielded  no  experience.  In  1910  the  people 
of  Oregon  amended  their  constitution  in  such  a  way  as  to  empower 
the  voters  to  "regulate  taxation  and  exemptions  within  their 
several  counties,  subject  to  any  general  law  which  may  here- 
after be  enacted."  But  before  this  amendment  was  made  effec- 
tive in  any  county  it  was  repealed.  As  indicative  of  what  it  was 
believed  could  be  done  under  the  amendment,  the  following  bill 
submitted  to  the  voters  of  one  of  the  counties  is  appended : 


Separation  a  Step  Toward  Local  Option  139 


"Section  1.  That  all  business,  labor,  trades,  occupations, 
professions,  and  the  right  to  conduct,  work  at  or  practice  the 
same;  and  all  forms  of  personal  property;  and  all  improvements 
on,  in  and  under  all  land  shall  be  and  hereby  are  exempted  from 
taxation  for  any  purpose  within  Clackamas  county,  and  no  tax 
shall  be  imposed  upon  any  trade,  labor,  business,  occupation  or 
profession  under  the  pretext  of  a  license  or  the  exercise  of  the 
police  power  within  said  county;  but  in  its  application  to  licenses 
and  permits  this  is  intended  only  to  prevent  the  raising  of  revenue 
from  such  licenses  and  permits,  and  to  prevent  exacting  of  fees 
therefor  greater  than  the  cost  of  issuing  the  permit  or  license, 
and  is  not  intended  to  impair  the  police  power  of  the  county, 
city  or  state." 

"Section  2.  All  taxes  within  Clackamas  county  shall  be 
levied  on  and  collected  from  the  assessed  values  of  all  lands, 
water  powers,  deposits,  natural  growths,  and  other  natural 
resources,  and  on  and  from  the  assessed  values  of  public  service 
corporation  franchises  and  rights  of  way.  This  act  does  not 
affect  corporation  license  fees  and  inheritance  taxes  collected 
directly  by  the  state,  nor  such  lands  as  are  used  only  for  muni- 
cipal, educational,  literary,  scientific,  religious  or  charitable 
purposes,  already  exempt  from  taxation  by  law." 

As  stated  above  the  Oregon  local  option  amendment  has 
been  repealed.  There  is  now  pending  before  the  people  of  Cali- 
fornia an  amendment  which  if  adopted  will  give  the  people  of 
"any  county,  city  and  county,  city  or  town  "the  power  to  "exempt 
from  taxation  for  local  purposes  in  whole  or  in  part,  any  one  or 
more  of  the  following  classes  of  property:  Improvements  in,  on 
or  over  land;  shipping;  household  furniture;  live  stock;  mer- 
chandise; machinery;  tools;  farming  implements;  vehicles; 
other  personal  property  except  franchise."  In  Colorado  cities 
have  the  option  of  exempting  improvements  on  real  estate  from 
taxation  or  practically  so.  Under  this  power  the  city  of  Pueblo 
provided  by  ordinance  for  exempting  such  improvements  to  the 
extent  of  50  per  cent  of  their  value  after  January  1,  1914,  and  to 
the  extent  of  99  per  cent  of  their  value  a  year  later.  The  legisla- 
ture of  Nebraska  in  1913  had  under  consideration  a  measure 
looking  in  the  direction  of  limited  local  option.  Senate  File 
No.  161  provided  for  the  submission  of  an  amendment  to 
Article  IX,  Section  6  of  the  constitution  which  if  adopted 
would  give  the  legislature  power  to  vest  all  municipal 
corporations  with  authority  to  assess  and  collect  taxes  "upon 
such  sources  of  revenue  as  they  shall  prescribe  according  to  rules. 


140  Report  of  Nebraska  Tax  Commissoon 

of  taxation  which  shall  be  uniform,  provided  that  reasonable 
exemptions  may  be  allowed."  This  bill  passed  the  Senate  by  a 
vote  of  23  to  6,  but  failed  in  the  House. 

Without  experience  to  guide  in  the  matter  of  local  option 
we  are  inclined  to  the  belief  that  the  advantages  to  be  expected 
from  this  plan  of  reform  have  been  over-estimated  and  that  its 
limitations  and  the  dangers  likely  to  follow  any  large  grant  of 
authority  to  the  local  governments  are  seriously  to  be  considered 
before  any  step  is  taken  in  that  direction.  What  these  limita- 
tions and  dangers  are  is  succinctly  set  forth  in  the  address  of  Mr. 
Adams  to  whhh  reference  has  already  been  made: 

"In  the  first  place,  separation  and  home  rule  cannot  ma- 
terially increase  the  positive  fiscal  freedom  of  the  local  govern- 
ments. It  is  doubtful  whether  they  can  safely  be  permitted  to 
exempt  any  class  of  property  they  desire  to  relieve  from  taxa- 
tion; but  it  is  perfectly  plain  that  they  cannot  be  allowed  to 
devise  new  taxes.  Take  the  income  tax,  for  example.  Not  only 
would  it  be  impossible  for  a  local  government  to  administer  the 
income  tax  without  the  right  to  call  upon  other  officers  of  the 
state  for  information  and  assistance,  but  the  difficult  definitions 
and  interpretations  of  income  which  the  various  local  govern- 
ments might  introduce,  would  bring  about  an  intolerable  amount 
of  multiple  taxation.  Or  take  the  much  more  feasible  ]  reject  of 
license  or  business  taxes  upon  commercial  and  manufacturing 
concerns  in  lieu  of  the  present  taxes  upon  plant  and  stock.  The 
various  local  districts  of  a  state  could  never  be  permitted  to 
define  and  manipulate  such  taxes  as  they  might  see  fit.  Suppose 
a  manufacturing  concern  had  its  factory  and  warehouse  in 
village  A  and  its  principal  office  and  salesroom  in  city  B.  The 
village  might  impose  the  present  property  tax  on  plant  and  stock 
while  the  city  might,  by  adopting  some  plan  of  apportioning  the 
total  capital  value  of  such  concerns  according  to  business  done 
or  gross  income,  tax  practically  all  of  this  property  again  in 
another  way.  Furthermore,  the  local  governments  could  not 
safely  be  permitted  to  tax  individual  categories  of  personal 
property  as  they  saw  fit.  Take  mortgage  taxation.  County  A 
might  institute  a  recording  tax  and  County  B  the  separate  taxa- 
tion of  mortgages  as  personal  property.  Yet  an  individual 
mortgagee  residing  in  B  might  lend  his  money  in  county  A,  with 
the  result  that,  whether  mortgagee  or  mortgagor  ultimately  paid 
the  tax,  it  would  be  double  or  multiple  taxation  of  the  most 
vicious  kind.  In  general,  it  is  a  safe  conclusion  that  the  income 
tax,  business  taxes,  and  all  manner  of  ad  valorem  assessment]  in 
the  spirit  of  the  so-called  unit  rule  would  have  to  be"denied;the 
local  governments  under  the  scheme  of  home  rule.  With'tbe 


Piling  Up  the  Levies  141 

growing  and  commendable  practice  of  distributing  the  intangible 
values  of  going  concerns  in  accordance  with  their  business  or 
tangible  property,  it  is  doubtful  whether  even  the  method  of 
assessing  tangible  property  can  be  left  to  the  discretion  of  the 
local  governments.  The  opportunities  for  double  taxation  are 
too  manifold.  While  the  habitation  or  occupancy  tax  mig-ht 
safely,  perhaps,  be  left  to  the  local  governments  (although  even 
this  is  problematical),  most  of  the  possible  substitutes  for  the 
personal  property  tax  can  be  introduced  only  as  state  taxes, 
As  a  matter  of  fact  it  is  probable  that  the  average  legislature 
will  never  permit  the  local  governments  to  bid  against  each  other 
for  the  location  of  manufacturing  concerns,  although  the  pros 
and  cons  of  this  particular  scheme  seem  to  be  evenly  balanced. 
In  other  words,  the  tax  laws  for  the  local  districts  will  always  have 
to  be  made  by  the  state  legislature. 

Evidently  then,  the  phrase  'home  rule'  does  not  mean 
exactly  what  the  words  imply.  We  want  the  local  governments 
to  have  the  liberty  to  exempt  personal  property,  but  we  do  not 
want  them  to  have  liberty  to  tax  corporations  as  they  please. 
We  are  advocating  freedom  when  what  we  want,  or  at  least  the 
only  thing  we  can  have,  is  another  kind  of  control.  What  we  need 
is  not  less  state  regulation  in  the  matters  of  local  taxation,  but 
more  intelligent  state  regulation." 

4.  Piling  up  the  Levies. — Another  argument  for  segre- 
gation is  that  it  would  avoid  the  evil  of  piling  the  levies  of  all 
the  governments  on  one  base,  that  of  the  value  of  property. 
Here  is  a  serious  fault  in  our  system.  No  one  can  doubt  that  the 
larger  the  levies  the  greater  the  motive  for  under-valuation  and 
other  devices  for  escaping  the  tax.  The  real  trouble  here,  how- 
ever, is  with  too  large  a  dependence  on  the  property  tax.  As  long 
as  ad  valorem  taxes  furnish  so  large  a  part  of  the  public  revenues 
the  evil  will  continue.  Mere  segregation  will  afford  little  relief. 
Suppose  the  railroad  taxes  were  turned  over  to  the  state  and 
satisfied  the  state's  need.  The  7.8  mills  now  levied  on  general 
property  for  the  state  would  no  longer  be  needed ;  but  the  valua- 
tions of  general  property  for  local  purposes  would  be  reduced  by 
the  withdrawal  of  railroad  property  from  local  taxation  and  the 
local  levies  must  be  correspondingly  increased.  The  best  way  to 
remedy  this  evil  is  to  use  a  different  base  for  part  of  the  taxes. 
This  is  one  of  the  merits  of  the  income  tax  considered  elsewhere. 
An  increase  of  the  inheritance  tax  would  serve  the  same  purpose, 
of  relieving  the  strain  of  ad  valorem  taxation, 


142  Report  of  Nebraska  Tax  Commission 

Effect  of  Separation  on  Economy. — The  arguments  for 
a  complete  separation  of  sources  based  on  the  functions  of  the 
governments,  the  failure  to  equalize  properly,  and  the  evils  of 
piling  of  levy  upon  levy,  are  therefore  not  fully  convincing.  On 
the  other  hand  there  is  at  least  one  good  reason  why  the  state 
should  not  have  wholly  independent  sources  of  revenue.  It  may 
be  but  a  crude  method  of  passing  on  the  economy  of  government 
to  judge  simply  by  the  size  of  the  levies,  but,  crude  as  it  is,  it  is 
about  the  only  method  the  electorate  has  of  reaching  conclusions 
under  present  conditions.  If  the  state  derived  its  revenues  from 
corporation  taxes,  e.  g.  and  made  no  levy  on  general  property, 
the  great  body  of  taxpayers  would  have  their  interest  diverted 
from  the  question  of  the  appropriations  which  they  now  watch 
with  some  care.  They  would  erroneously  suppose  that  the 
weight  of  any  excessive  use  of  public  funds  would  affect  only 
the  corporations.  They  would  lose  sight  of  the  fact  that  cor- 
poration taxes  are  in  the  long  run  mainly  indirect  and  will  sooner 
or  later  be  paid  by  those  who  employ  their  services.  Thus  the 
most  effective  check  the  voters  now  have  upon  extravagant  ex- 
penditures would  be  swept  away.  In  such  a  situation  we  might 
properly  expect  (1)  a  marked  increase  in  the  state's  scale  of  ex- 
penditures and  (2)  an  increase  of  corporation  interest  in  state 
legislation. 

Partial  Separation  Desirable. — The  state  now  has  certain 
independent  sources.  The  state  treasury  received  in  1913 
$741,623  from  educational  lands  and  investments,  all  for  the  use 
of  the  schools;  from  the  federal  government  grants  amounting 
to  $120,232  also  devoted  to  education;  $569,552  from  depart- 
mental fees  and  earnings,  licenses,  escheats,  convict  labor,  fees 
from  self-supporting  offices  and  boards;  while  from  the  general 
tax  on  property  payments  into  the  treasury  amounted  to  $2,249,- 
337.  Some  progress  has  recently  been  made  in  supplying  the 
state  with  new  taxes.  The  corporation  occupation  tax  first  pro- 
vided in  1909  goes  into  the  state  treasury.  As  amended  by  the 
act  of  1913  this  tax  yields  about  $90,000  a  year.  The  last  legisla- 
ture turned  the  troublesome  but  not  prolific  car-company  tax  into 
the  state  treasury  and  also  the  2  per  cent  gross  earnings  tax  on 
express  companies,  though  in  this  case  the  old  local  taxes  were 
left  untouched.  This  process  should  be  carried  further,  not  for 
the  purpose  of  abdicating  to  the  local  governments  all  power 


Localization  of  Values  143 

over  assessments  but  for  the  purposes  and  reasons  mentioned  at 
the  beginning  of  this  chapter. 

5.  Separation  Based  on  Efficiency  of  Administration. 

—There  are  some  taxes  the  local  officials  cannot  successfully 
administer.  We  have  called  attention  elsewhere  to  the  failure  of 
the  local  governments  to  deal  with  the  taxes  on  insurance  com- 
panies. They  should  be  administered  by  the  Insurance  Com- 
missioner. For  similar  reasons  the  telegraph,  express,  and  Pull- 
man company  taxes,  and  those  on  inheritances  should  be  admin- 
istered by  state  officers  and  the  funds  turned  to  state  uses. 

6.  The    Localization    of    Values.— Complaint   is    made 
under  present  conditions  that  the  tax  burden  is  not  equitably 
apportioned  because  of  the  way  property  values  are  localized. 
The  well  established  rule  is  to  tax  property  at  its  situs  for  the 
benefit  of  the  government  within  whose  boundaries  it  lies.    A 
mill,  a  mine  or  factory  beyond  the  limits  of  a  taxing  district 
cannot  be  touched  by  it  for  purposes  of  taxation.    This  no  doubt 
is  a  sound  general  rule.    Usually  where  there  are  large  accumula- 
tions of  wealth  there  is  large  need  of  public  revenues,  and  the 
contrary.    But  often  property  values  are  located  in  such  a  way  as 
to  escape  their  just  share  of  taxes.    It  was  this  fact  that  led  the 
people  of  California  to  adopt  a  plan  of  complete  separation.    It 
was  found  that  the  property  of  water,  light  and  power  companies, 
and  frequently  their  principal  offices,  were  located  in  districts  of 
scant  population  where  the  levies  were  low,  though  the  services 
were  rendered  and  paid  for  in  distant  and  more  populous  places. 
The  railroad  values,  owing  to  the  necessity  of  entering  the  state 
through  certain  gateways,  were  also  piled  up  in  communities 
where  there  was  little  need  of  revenue,  to  the  great  advantage  of 
the  few  people  of  the  community  and  of  the  railroad  companies. 
On  the  theory  that  these  values  had  more  than  a  local  interest 
and  that  railroads  owed  something  to  all  parts  of  the  state,  the 
railroad  taxes  were  turned  to  the  state's  use.    The  principle  was 
the  easier  seen  when  it  was  proposed  to  tax  the  roads  on  the  gross 
earnings  basis.    Everybody  who  used  the  railroads  contributed 
to  these  earnings;  why  should  not  all  benefit  by  the  taxes  derived 
from  them? 

The  most  conspicuous  example  of  this  kind  in  Nebraska  is 
also  in  connection  with  the  railroads.  The  roads  themselves  are 
fairly  well  distributed,  though  four  counties  are  not  touched  by 


144  Report  of  Nebraska  Tax  Commission 

them  and  a  number  of  other  counties  have  but  a  small  mileage. 
The  state  board  values  the  railroads  and  apportions  to  each 
county,  city,  township,  road  and  school  district,  both  tangible 
and  intangible  values  according  to  the  number  of  miles  of  road. 
Neighboring  districts  whose  citizens  make  as  much  use  of  the 
railway  and  contribute  as  much  to  its  earnings  as  the  citizens  of 
the  district  where  the  road  is  located,  get  no  tax  revenue  from  it 
for  local  purposes.  The  greatest  disparity  of  tax  burden  is  found 
in  supporting  schools  especially  in  the  western  counties  on  account 
of  this  plan  of  distributing  the  railroad  tax.  It  is  urged  on  the 
one  hand  that  all  districts  of  the  county  should  be  allowed  to 
levy  on  the  railroad  valuation;  on  the  other  hand,  that  there  is 
no  more  reason  for  a  district  without  mileage  to  benefit  by  the 
railroad  values  in  another  district  than  to  benefit  by  the  value  of 
real  estate  or  factories  in  a  neighboring  town.  If  the  present 
method  of  apportioning  these  taxes  is  abandoned,  what  method 
should  be  substituted  therefor? 

The  question  here  raised  is  largely  one  as  to  the  proper  size 
of  the  taxing  district  but  it  also  involves  the  question  whether 
certain  kinds  of  property  should  be  dealt  with  in  larger  districts 
than  the  general  mass  of  property.  The  specific  problem  is 
whether  the  railroad  property  is  of  such  a  peculiar  character 
that  the  people  of  districts  lying  at  a  distance  from  the  railway  have 
a  claim  upon  it  for  purposes  of  local  taxation.  Without  entering 
upon  the  difficult  task  of  determining  the  line  of  demarcation 
between  property  that  should  be  treated  as  purely  local  and 
that  clothed  with  a  more  general  interest,  we  have  no  difficulty 
in  reaching  the  conclusion  that  the  present  method  of  apportion- 
ing all  railroad  values  to  the  districts  containing  railway  track 
works  an  injustice  to  the  non-railroad  districts. 

Some  study  has  been  made  of  the  relative  tax  burden  for 
maintaining  the  schools  in  railroad  and  non-railroad  districts, 
especially  in  those  counties  where  land  values  are  relatively  low. 
County  treasurers  were  asked  to  give  the  items  indicated  in  the 
table  which  follows  for  six  districts  having  a  railroad  and  six 
districts  without  railroad  mileage.  In  some  cases  village  districts 
have  been  included.  Thus  the  high  average  attendance  in  Cherry 
and  Kimball  counties  indicates  that  such  districts  are  included 
in  the  railroad  group,  but  for  the  most  part  the  comparison  is 


Localization  of  Values 


145 


between  rural  districts.     The  following  table  shows  the  results 
of  the  inquiry  for  six  counties : 


COUNTY 

Average 
Total 
Valuation 

Average 
Railroad 
Valuation 

Average 
School 
Levy 

(Mills) 

Average 
Amount 
of  Taxes 
Raised 

Average 
Attend- 
ance 

Average 
Number 
Months 
of  School 

Adams 
Railroad  .  . 
Non-Railroad  .  . 
Cherry 
Railroad  .  . 
Non-Railroad  .  . 
Holt 
Railroad  .  . 
Non-Railroad  .  . 
Kimball 
Railroad  .  . 
Non-Railroad  .  . 
Madison 
Railroad  .  . 
Non-Railroad  .  . 
Phelps 
Railroad  .  . 
Non-Railroad  .  . 

$559,806 
247,116 

612,690 
64,965 

191,971 
128,079 

848,795 
150,975 

539,522 
440,613 

516,400 
240,860 

$163,333 

9.89 
15.8 

24.3 

28.7 

7.99 
17.3 

9.94 
35.32 

7.39 

8.34 

4.96 
11.9 

$5,540 
3,921 

14,925 
11,870 

1,535 
2,225 

8,434 
5,332 

3,987 
3,676 

2,565 

2,878 

27 
15 

91 
9 

8 
8 

36 
15 

14 
17 

14 

17 

85/6 
6| 

6| 

7 

85/6 
7f 

85/6 
9 

85/6 
8 

226,030 

99,470 
591,075 
157,864 

211,695 

In  view  of  such  a  situation,  the  peculiar  character  of  the 
railway  industry,  and  of  the  way  railroad  values  are  localized  we 
would  have  no  hesitation  in  recommending  a  change  in  the 
present  method  of  apportioning  the  railroad  taxes  if  it  were  not 
for  the  disturbance  it  would  involve  in  the  financial  interests  that 
have  grown  up  under  it.  If  only  rural  districts  were  concerned 
the  case  would  be  fairly  clear  that  justice  requires  a  change  in  the 
law;  for  they  are  all  attempting  to  maintain  about  the  same 
kind  of  school.  But  the  villages  and  cities  which  have  by  assum- 
ing heavy  burdens  built  up  and  are  maintaining  a  high  school 
are  in  a  different  position.  Many  of  them  would  never  have 
undertaken  such  a  burden  but  for  the  railroad  taxes  and  to 
withdraw  these  taxes,  or  to  divide  them  for  the  support  of  ncn- 
railroad  districts  would  bring  a  peculiar  hardship  to  the  high 
school  districts.  We  are  not  contending  that  these  districts  have 
acquired  an  inviolable  "vested  right"  to  the  railroad  taxes;  but 
we  are  pointing  out  that  interests  which  have  grown  up  in  a 
perfectly  natural  way  under  a  generally  sound  system  ought 
to  receive  careful  consideration  before  they  are  seriously  cis- 
turbed. 


146 


Report  of  Nebraska  Tax  Commission 


Table  Showing  for  the  Year   1913  the  Effect  on  Each   County   (I)   of 
Turning  the  Railroad  Taxes  Into  the  General  Fund  of  the  State 
Treasury;     (II)  the  Effect  of  Distributing  the  Railroad  Taxes 
to   the   Counties  on  the   Basis  of  the  School  Population; 
and   (III)   the  Effect  of  Substituting  "Local  Expend- 
itures"  as  a   Basis  of   Charging  State  Taxes  to 
the  Counties 


Counties 

Assessed  Valuation 

I  —  Taxes  for  Year  1913 

Total 

(1) 

Railroad 
Property 

(2) 

State  Taxes 
Charged 

(3) 

Railroad 
Taxes 
Collected 

(4) 

Adams                      .  .  . 

$7,657,232 
5,283,142 
436,929 
587,155 
5,608,066 
2,052,616 
2,798,599 
1,832,301 
7,623,468 
6,996,826 
7,917,320 
8,430,797 
8,211,089 
1,080,509 
3,577,400 
2,738,647 
8,071,012 
5,822,425 
7,802,685 
7,408,979 
3,180,568 
2,267,310 
6,671,635 
1,221,201 
4,685,992 
9,618,980 
45,486,359 
1,516,763 
7,477,178 
3,924,478 
2,710,601 
4,030,376 
11,631,679 
1,006,711 
714,763 
1,953,689 
749,981 
3,429,607 
7,918,553 
7,924,559 
3,32(0,926 
734,001 
1,887,351 
4,737,294 
558,092 
4,433.952 

$980,802 
459,340 

$59,726 
41,209 
3,408 
4,580 
43,743 
16,010 
21,829 
14,292 
59,463 
54,575 
61,755 
65,760 
64,047 
8,428 
27,904 
21,361 
62,954 
45,415 
60,861 
57,790 
24,808 
17,685 
52,039 
9,525 
36,551 
75,028 
354,794 
11,831 
58,322 
30,611 
21,143 
31,437 
90,727 
7,853 
5,575 
15,239 
5,850 
26,751 
61,765 
61,812 
25,903 
5,725 
14,721 
36,951 
4,353 
34.585 

$40,553 
19,951 

o'/rie 

19,637 
19,255 
1,291 
10,236 
64,332 
19,754 
36,936 
54,383 
19,436 
4,475 
33,523 
48,375 
33,899 
21,996 
11,347 
45,161 
24,398 
32,696 
56,972 
24,765 
20,202 
53,841 
277,524 
25,347 
36,472 
18,341 
11,874 
28,525 
61,989 
8,039 
1,053 
5,840 
9,809 
12,974 
43,937 
17,124 
27,978 
2,255 
28,643 
28,079 
15,888 
29254 

Antelope     

Banner    

Blaine     

187,476 
487,994 
466,110 
235,340 
193,200 
1,460,176 
428,181 
994,551 
1,297,336 
529,574 
73,920 
786,170 
1,093,700 
977,877 
580,345 
265,686 
960,597 
503,339 
742,204 
1,137,696 
602,100 
475,290 
1,139,515 
1,958,051 
665,440 
1,013,116 
405,582 
224,000 
645,120 
1,461,045 
166,30iO 
22,935 
145,040 
315,180 
339,739 
1,015,236 
522,658 
695,700 
50,360 
571,440 
502,380 
307,836 
700.581 

Boone   

Box  Butte 

Bovd 

Brown                

Buffalo  

Burt  

Butler  

Cass 

Cedar 

Chase                  

Cherry           

Cheyenne  
Clay  
Colfax  

Cuming 

Custer                 .    . 

Dakota       

Dawes   

Dawson  

Deuel  

Dixon 

Dodge                .    . 

Douglas    

Dundy  

Fillmore  

Franklin  

Frontier               .  . 

Furnas      

Gage         

Garden  

Garfield 

Gosper 

Grant  

Greeley   

Hall 

Hamilton 

Harlan  

Hayes  

Hitchcock 

Holt                     

Hooker  

Howard.. 

The  Railroad  Taxes 


147 


Table   Showing  for  the  Year   1913  the  Effect  on  Each  County   (I)   of 
Turrirg  the  Pailrcad  Taxes  Into  the  General  Fund  of  the  State 
Treasury;     (II)  the  Effect  of  Distributing  the  Railroad  Taxes 
to  the   Counties  on  the  Basis  of  the  School  Population; 
and    (III)  the  Effect  of  Substituting  "Local  Expend- 
itures" as  a  Basis  of  Charging  State  Taxes  to 
the  Counties — (Continued) 

I— Taxes  for  the  Year  1913 


Local  Share 
of  Railroad 
Taxes 

(5) 

State's 
Share 
of  Railroad 
Taxes 

(6) 

Difference 
BetweenState 
TaxesCharged 
and  Railroad 
Taxes  Col- 
lected in  Each 
County 
CO 

State  Tax 
RequiredOver    The  Gain 
and  Above     to  Counties 
Amount  of     by  Turning 
Railroad  Tax  R.  R.  Taxes 
Collected       into  State 
(2.75  Mills)      Treasury 
(8)                   (9) 

The  Loss 
to  Counties 
by  Turning 
R.  R.  Taxes 
into  State 
Treasury 
(10) 

$32,903 
16,368 

7,254 
15,831 
15,619 
455 
8,729 
52,943 
16,414 
29,178 
44,264 
15,305 
3,898 
27,391 
39,844 
26,272 
17,469 
9,275 
37,668 
20,472 
26,907 
48,098 
20,069 
16,495 
44,953 
262,251 
20,157 
28,570 
15,177 
10,127 
23,493 
50,593 
7,742 
874 
4,709 
7,351 
10,324 
36,018 
13,047 
22,552 
1,862 
24,186  . 
24,160 
12,987 
23,789 

$7,650 
3,583 

*  Y,462 
3,806 
3,636 
1,836 
1,507 
11,389 
3,340 
7,758 
10,119 
4,131 
577 
6,132 
8,531 
7,627 
4,527 
2,072 
7,493 
3,926 
5,789 
8,874 
4,696 
3,707 
8,888 
15,273 
5,190 
7,902 
3,164 
1,747 
5,032 
11,396 
1,297 
179 
1,131 
2,458 
2,650 
7,919 
4,077 
5,426 
3^3 
4,457 
3,919 
2,401 
5.465 

$19,174 
21,258 
3,408 
4,136 
24,106 
3,245 
20,538 
4,056 
4,869 
34,821 
24,819 
11,377 
44,610 
3,953 
5,619 
27,013 
29,055 
23,419 
49,514 
12,629 
411 
15,011 
4,933 
15,240 
16,349 
21,187 
77,269 
13,516 
21,850 
12,269 
9,269 
2,912 
28,738 
186 
4,522 
9,399 
3,959 
13,777 
17,828 
44,688 
2,075 
3,470 
13,922 
8,872 
11,035 
5,331 

$18,360 
13,265 
1,202 
1,099 
14,080 
4,363 
7,049 
4,508 
16,949 
18,064 
19,038 
19,617 
21,124 
2,768 
7,676 
4,524 
19,506 
14,416 
20,727 
17,733 
7,362 
4,194 
15,218 
1,703 
11,579 
23,319 
119,703 
2,341 
17,776 
9,677 
6,838 
9,309 
27,969 
2,311 
1,903 
4,974 
1,196 
8,497 
18,984 
20,350 
7,219 
1,880 
3,619 
11,646 
688 
10,267 

$814 
7,993 
2,206 

'  10,026 
"  13',489 

'  16',757 
5,781 

'  23,486 
1,185 

9,549 
9,003 

28,787 

5,235 
7,608 

'452 
21,818 

8,240 

'  13',295 
31,537 

5,104 
6,951 
19,205 
20,151 
16,943 

4,770 

2,132 
42,434 
15,857 



4,074 
2,592 
2,431 

"769 

2,6i9 
4,425 

6,397 

2,497 

5,i55 
'  l',i56 

5,280 
'  24,333 

9,294 

1,590 

17,541 
2,774 
11,723 
4,936 

148 


Report  of  Nebraska  Tax  Commission 


Table  Showing  for  the  Year   1913  the  Effect  on  Each   County   (I) 
Turning  the  Railroad  Taxes  Into  the  General  Fund  of  the  State 
Treasury;     (II)   the  Effect  of  Distributing  the  Railroad  Taxes 
to  the   Countiei  on  the  Basis  of  the  School   Population; 

and    (III)   the  Effect  of  Substituting   "Local    Expend- 
itures"  as  a  Basis  of   Charging   State  Taxed  to 
the  Counties — (Continued) 


of 


Counties 

Assessed  Valuation          1—  T&X6S  for  Year  1913 

Total 

(1) 

Railroad 
Property 

(2) 

State  Taxes 
Charged 

(3) 

Raili-Odd" 
Taxes 
Collected 

(4) 

Jefferson  .  
Johnson          .    .           . 

6,982,280 
4,756,115 
4,297,134 
2,166,478 
1,006,543 
1,515,052 
5,841,897 
23,980,164 
5,334,410 
532,445 
419,928 
545,377 
6,906,174 
5,279,341 
1,571,682 
4,171,545 
5,773,820 
6,095,336 
8,726,464 
5,438,629 
1,370,237 
4,400,861 
4,663,348 
9,043,071 
5,663,987 
3,089,829 
7,582,241 
1,192,469 
8,228,839 
4,254,636 
10,493,969 
2,788,631 
8,499,228 
2,860,442 
3,204,661 
1,397,566 
4,416,184 
6,142,077 
532,546 
3,426,161 
3,641,053 
5,862,859 
5,702,159 
5,388,463 
696,934 
9,077,353 

989,651 
435,006 
641,058 
1,146,850 

'  814,725 
404,309 
2,235,770 
1,702,190 
102,319 

54,462 
37,098 
33,518 
16,899 
7,851 
11,817 
45,567 
187,045 
41,608 
4,153 
3,275 
4,254 
53,868 
41,179 
12,259 
32,538 
45,036 
47,544 
68,066 
42,421 
10,688 
34,327 
36,374 
70,536 
44,179 
24,101 
59,141 
9,301 
64,185 
33,186 
81,853 
21,751 
66,294 
22,311 
24,996 
10,901 
34,446 
47,908 
4,154 
26,724 
28,400 
45,730 
44,477 
42,030 
5,436 
70,803 

36,580 
17,182 
24,533 

48,582 

'  24,69i 
20,855 
110,936 
80,622 

5,585 

Kearney         

Keith  

Keya  Paha  

Kimball  

Knox   

Lancaster       .    . 

Lincoln           .            .    . 

Logan              

Loup          

McPherson  
Madison  
Merrick  

458,066 
1,167,184 
511,050 
312,248 
454,416 
842,404 
779,415 
717,883 
307,020 
486,676 
370,589 
1,062,056 
253,338 
594,090 
668,822 
161,840 
813,098 
1,218,472 
1,210,648 
283,550 
695,316 
666,546 
453,173 
386,420 
163,396 
670,185 
339,762 
268,831 
304,807 
388,373 
377,941 
530,532 
13,440 
639,606 

24,427 
44,828 
25,697 
14,131 
16,253 
30,685 
31,977 
28,540 
10,888 
16,567 
15,162 
33,582 
10,448 
28,032 
25,555 
7,059 
27,789 
46,365 
43,635 
16,424 
23,064 
25,667 
23,420 
15,543 
6,466 
26,737 
18,234 
14,048 
13,000 
21,838 
14,334 
20,917 
878 
21,680 

Morrill 

Nance 

Nemaha  
Nuckolls   

Otoe  

Pawnee  

Perkins 

Phelps  
Pierce 

Platte          

Polk  

Red  Willow  
Richardson  
Rock  
Saline  
Sarpy  
Saunders  

Scotts  Bluff 

Seward 

Sheridan      

Sherman  
Sioux  

Stanton 

Thayer  
Thomas  

Thurston  .  . 

Valley 

Washington 

Wayne  

Webster  
Wheeler 

York   

Totals.  . 

$470.690.414 

$55.829.329 

$3.671.384 

$2.530.011 

The  Railroad  Taxes 


149 


Table  Showing  for  the  Year  1913  the   Effect  ov  Each  County   (I)   of 
Turning  the  Railroad  Taxes  Into  the  General  Fund  of  the  State 
Treasury;    (II)  the  Effect  of  Distributing  the  Railroad  Taxes 
to  the   Counties  on  the   Basis  of  the  School  Population; 
and   (III)   the  Effect  of  Substituting  "Local  Expend- 
itures" as  a  Basis  of  Charging  State  Taxes  to 
the  Counties — (Continued) 

I— Taxes  for  the  Year  1913 


Local  Share 
of  Railroad 
Taxes 

(5) 

State's 
Share 
of  Railroad 
Taxes 

(6) 

Difference 
BetweenState 
TaxesCharged 
and  Railroad 
Taxes  Col- 
lected in  Each 
County 
(7) 

State  Tax 
RequiredOver 
and  Above 
Amount  of 
Railroad  Tax 
Collected 
(2.75  Mills) 
(8) 

The  Gain 
to  Counties 
by  Turning 
R.  R.  Taxes 
into  State 
Treasury 
(9) 

The  Loss 
to  Counties 
by  Turning 
R.R.  Taxes 
into  State 
Treasury 
(10) 

28,861 
13,789 
19,533 
39,637 

'  18,336 
17,701 
93,497 
67,345 
4,796 

7,719 
3,393 
5,000 
8,945 

17,882 
19,915 
8,985 
31,684 
7,851 
12,873 
24,712 
76,109 
39,014 
1,432 
3,275 
4,254 
29,441 
3,649 
13,438 
18,408 
28,783 
16,858 
36,089 
13,882 
200 
17,759 
21,213 
36,954 
33,731 
3,931 
33,587 
2,243 
36,396 
13,178 
38,218 
5,327 
43,230 
3,356 
1,576 
4,642 
27,981 
21,162 
14,080 
12,676 
15,400 
23,893 
30,143 
21,113 
4,558 
49,123 

16,480 
11,883 
10,054 
2,804 
2,768 
1,926 
14,953 
59,797 
9,989 
1,183 
1,155 
1,500 
17,732 
11,308 
2,917 
10,613 
14,628 
14,446 
21,854 
12,982 
2,924 
10,764 
11,805 
21,948 
14,879 
6,863 
19,012 
2,834 
20,393 
8,349 
25,529 
6,889 
21,461 
6,033 
7,567 
2,781 
11,695 
15,048 
530 
8,683 
9,175 
15,055 
14,642 
13,359 
1,880 
23,204 

1,402 
8,032 

1,069 

34,488 

'  14,799 

5,083 

6,355 
3,154 
17,439 
13,277 
798 

9,759 
16,312 

"  49,003 
2,615 

2,120 
2,754 
11,709 

7,795 
14,155 
2,412 
14,235 
900 

6,995 
9,408 
15,006 

18,852 

'  14,575 

'  20,854 
35,724 
21,711 
11,695 
12,709 
24,114 
25,898 
22,941 
8,493 
12,771 
12,271 
25,298 
8,472 
23,308 
20,338 
5,797 
21,447 
36,861 
34,192 
14,212 
17,641 
20,468 
19,885 
12,529 
5,192 
21,510 
15,584 
11,951 
10,623 
18,809 
11,386 
16,779 
773 
16,691 

'  3,573 
9,104 
3,986 
2,436 
3,544 
6,571 
6,079 
5,599 
2,395 
3,796 
2,891 
8,284 
1,976 
4,634 
5,217 
1,262 
6,342 
9,504 
9,443 
2,212 
5,423 
5,199 
3,535 
3,014 
1,274 
5,227 
2,650 
2,097 
2,377 
3,029 
2,948 
4,138 
105 
4,989 



14,957 
16,355 

3,124 

'  10,794 
"59i 
'  21,527 

16,003 
'  12,689 

1,562 

21,769 

9,389 
5,991 
7,423 

'  16,286 
6,114 

3,993 
6,225 
8,838 
15,501 
7,754 
2,678 
25,919 

'  14,610 

$2,094,546 

$435,465 

$1,141,373 

$1,141,373 

$487,232 

$486,732 

150 


Report  of  Nebraska  Tax  Commission 


Table  Showing  for  the  Year   1913  the  Effect  on  Each   County   (I)   of 
Turning  the  Railroad  Taxes  Into  the  General  Fund  of  the  State 
Treasury;     (II)  the  Effect  of  Distributing  the  Railroad  Taxes 
to  the   Counties  on  the   Basis  of  the  School   Population; 
and    (III)   the  Effect  of  Substituting  "Local   Expend- 
itures" as  a  Basis  of  Charging  State  Taxes  to 
the  Counties — (Continued) 


Counties 

II  —  Railroad  Taxes  Appor- 
tioned According  to 
School  Population,  1913 

III  —  State  Taxes  Charged 
on  the  Basis  of  Local 
Expenditures,  1913 

School 
Popula- 
tion 

(11) 

Percent 
of 
Total 
Popula- 
tion 
(12) 

Share 
of  Railroad 
Taxes 
Based  on 
School 
Population 
(13) 

Taxes 
Charged 
for  Local 
Purposes 
1913 
(14) 

Each 
Per  cent    County's 
of            Share 
Total       of  State 
Taxes  Ap- 
portioned 
(15)           (16) 

Adams     .    .     ' 

6,309 
5,281 
383 
582 
4,456 
2,031 
3,259 
2,083 
7,067 
4,142 
4,920 
6,081 
5,528 
1,235 
3,622 
1,531 
4,842 
4,119 
4,925 
8,443 
2,271 
2,263 
4,791 
519 
4,116 
7,096 
42,223 
1,262 
4,701 
3,725 
3,004 
3,843 
9,259 
1,296 
1,225 
1,758 
385 
2,997 
6,156 
4,181 
3,265 
1,087 
1,693 
5,434 
447 
3,911 

1.6605 
1.3900 
0.1008 
0.1531 
1.1728 
0.5345 
0.8577 
0.5482 
1.8600 
1.0902 
1.2949 
1.6005 
1.4550 
0.3250 
0.9533 
0.4029 
1.2744 
1.0841 
1.2963 
2.2222 
0.5977 
0.5956 
1.2610 
0.1376 
1.0833 
1.8677 
11.1134 
0.3321 
1.2373 
0.9804 
0.7906 
1.0115 
2.4370 
0.3411 
0.3224 
0.4627 
0.1013 
0.7888 
1.6203 
1.1004 
0.8593 
0.2861 
0.4456 
1.4302 
0.1176 
1.0294 

$42,012 
35,168 
2,551 
3,874 
29,673 
'  13,524 
21,701 
13,871 
47,059 
27,583 
32,762 
40,494 
36,813 
8,224 
24,120 
10,194 
32,243 
27,429 
32,798 
56,223 
15.123 
15,070 
31,904 
3,482 
27,409 
47,254 
281,172 
8,403 
31,305 
24,805 
20,003 
25,592 
61,657 
8,631 
8,158 
11,707 
2,564 
19,958 
40,995 
27,841 
21,741 
7,239 
11,275 
36,185 
2,977 
26.045 

$315,248 
200,828 
15,725 
20,786 
196,288 
108,665 
121,587 
90,292 
358,639 
257,686 
240,308 
274,834 
217,432 
53,501 
150,206 
108,799 
235,545 
178,549 
225,895 
378,528 
112,570 
118,768 
301,199 
45,488 
167,291 
353,539 
3,084,652 
59,053 
217,426 
146,887 
115,854 
170,104 
459,680 
39,034 
37,661 
65,655 
18,989 
114,307 
319,847 
221,381 
126,625 
34,287 
98,129 
85,793 
26,068 
159.786 

1.67531 
1.0672 
0.08351 
0.1104 
1.0431 
0.5774 
0.6461 
0.4798 
1.9059 
1.3694 
1.2770 
1.4605 
1.1555 
0.2843 
0.7982 
0.5782 
1.2517 
0.9488 
1.2005 
2.0116 
0.5982 
0.6312 
1.6007 
0.2417 
0.8890 
1.8788 
16.3932 
0.3138 
1.1554 
0.7806 
0.6157 
0.9040 
2.4429 
0.2074 
0.2001 
0.3489 
0.1009 
0.6074 
1.6998 
1.1765 
0.6729 
0.1822 
0.5215 
0.4559 
0.1385 
0.8491 

$61,509 
39,184 
3,068 
4,056 
38,298 
21,201 
23,724 
17,617 
69,978 
50,277 
46,885 
53,622 
42,425 
10,439 
29,307 
21,229 
45,957 
34,836 
44,077 
73,859 
21,964 
23,176 
58,769 
8,876 
32,641 
68,983 
601,862 
11,523 
42,421 
28,661 
22,607 
33,191 
89,693 
7,615 
7,348 
12,811 
3,705 
22,301 
62,412 
43,196 
24,707 
6,691 
19,148 
16,739 
5,086 
31,176 

Antelope  .  .  . 

Banner  

Blaine   

Boone   

Box  Butte  
Boyd 

Brown 

Buffalo    

Burt  

Butler   

Cass  

Cedar 

Chase  
Cherry 

Cheyenne  .... 
Clay  
Colfax  

Cuming  

Custer.  .  .  
Dakota  
Dawes       ... 

Dawson  
Deuel  

Dixon 

Dodge  
Douglas  

Dundy  
Fillmore  

Franklin  

Frontier  
Furnas  

Gage  

Garden  

Garfield 

Gosper  

Grant  

Greeley.  . 

Hall  
Hamilton  
Harlan  

Hayes 

Hitchcock  
Holt 

Hooker  

Howard., 

The  Railroad  Taxes 


151 


Table  Showing  for  the  Year   1913  the  Effect  on  Each  County   (I)   of 
Turning  the  Railroad  Taxes  Into  the  General  Fund  of  the  State 
Treasury;    (II)  the  Effect  of  Distributing  the  Railroad  Taxes 
to  the   Counties  on  the  Basis  of  the  School  Population; 
and   (III)   the  Effect  of  Substituting  "Local  Expend- 
itures" as  a  Basis  of  Charging  State  Taxes  to 
the  Counties — (Continued) 


Counties 

II  —  Railroad  Taxes  Appor- 
tioned According  to 
School  Population,  1913 

III  —  State  Taxes  Charged 
on  the  Basis  of  Local 
Expenditures,  1913 

School 
Popula- 
tion 

(11) 

Percent 
of 
Total 
Popula- 
tion 
(12) 

Share 
of  Railroad 
Taxes 
Based  on 
School 
Population 
(13) 

Taxes 
Charged 
for  Local 
Purposes 
1913 
(14) 

Percent 
of 
Total 

(15) 

Each 
County's 
Share 
of  State 
Taxes  Ap- 
portioned 
(16) 

Jefferson  
Johnson  
Kearney 

5,353 
3,468 
2,874 
1,140 
1,196 
748 
7,005 
21,118 
4,837 
634 
760 
1,131 
6,464 
3,045 
1,823 
3,020 
4,504 
4,445 
6,341 
3,441 
704 
2,952 
3,780 
6,756 
3,336 
3,371 
6,059 
1,327 
5,775 
2,833 
7,203 
3,460 
5,106 
2,340 
3,248 
1,779 
2,661 
4,820 
551 
3,217 
3,312 
4,327 
3,480 
4,149 
800 
5,486 

1.4089 
0.9128 
0.7564 
0.3000 
0.3147 
0.1968 
1.8437 
5.5584 
1.2731 
0.1668 
0.2000 
0.2976 
1.7013 
0.8014 
0.4798 
0.7948 
1.1854 
1.1699 
1.6690 
0.9057 
0.1852 
0.7769 
0.9949 
1.7782 
0.8780 
0.8872 
1.5947 
0.3492 
1.5200 
0.7456 
1.8958 
0.9107 
1.3439 
0.6159 
0.8549 
0.4682 
0.7003 
1.2686 
0.1450 
0.8467 
0.8717 
1.1389 
0.9159 
1.0920 
0.2105 
1.4439 

35,647 
23,095 
19,138 
7,591 
7,963 
4,980 
46,647 
140,630 
32,211 
4,221 
5,061 
7,530 
43,044 
20,277 
12,140 
20,110 
29,992 
29,600 
42,227 
22,915 
4,687 
19,657 
25,172 
44,990 
22,214 
22,447 
40,347 
8,836 
38,457 
18,865 
47,965 
23,042 
34,002 
15,584 
21,630 
11,847 
17,719 
32,097 
3,670 
21,423 
22,055 
28,815 
23,173 
27,629 
5,327 
36,532 

236,565 
169,846 
137,774 
96,126 
43,573 
77,611 
259,046 
1,326,112 
281,452 
28,134 
22,867 
22,004 
308,766 
185,050 
67,060 
169,988 
187,025 
202,674 
313,482 
175,605 
42,696 
138,113 
155,446 
236,973 
163,076 
144,082 
277,373 
49,699 
238,435 
147,341 
291,488 
166,060 
221,853 
115,413 
150,369 
60,002 
128,285 
203,281 
26,788 
147,235 
134,088 
189,169 
153,943 
192,555 
30,715 
251,949 

1.2572 
0.9026 
0.7321 
0.5108 
0.2315 
0.4124 
1.3766 
7.0475 
1.4957 
0.1496 
0.1215 
0.1169 
1.6409 
0.9834 
0.3563 
0.9033 
0.9939 
1.0770 
1.6659 
0.9332 
0.2269 
0.7339 
0.8261 
1.2593 
0.8666 
0.7657 
1.4740 
0.2641 
1.2671 
0.7830 
1.5490 
0.8825 
1.1790 
0.6133 
0.7991 
0.3188 
0.6817 
1.0803 
0.1423 
0.7824 
0.7126 
1.0053 
0.8181 
1.0233 
0.1632 
1,3389 

46,159 
33,139 
26,879 
18,756 
8,501 
15,143 
50,532 
258,746 
54,914 
5,493 
4,462 
4,293 
60,249 
36,106 
13,083 
33,166 
36,491 
39,542 
61,164 
34,262 
8,332 
26,945 
30,331 
•  46,236 
31,817 
28,113 
54,117 
9,697 
46,522 
28,748 
56,871 
32,401 
43,288 
22,518 
29,339 
11,706 
25,029 
39,664 
5,225 
28,726 
26,164 
36,909 
30,039 
37,571 
5,993 
49,158 

Keith  
Keya  Paha  .  .  . 
Kimball  

Knox  
Lancaster  .... 
Lincoln  
Logan  
Loup  
McPherson.  .  . 
Madison  
Merrick  
Morrill  
Nance  

Nemaha 

Nuckolls  .  .  . 

Otoe  
Pawnee  

Perkins  
Phelps  . 

Pierce  
Platte  
Polk  

Red  Willow  .  .  . 
Richardson.  .  . 
Rock  
Saline  

Sarpy 

Saunders 

Scotts  Bluff... 
Seward  
Sheridan  

Sherman 

Sioux  

Stanton  
Thayer  

Thomas 

Thurston  
Valley  

Washington.  .  . 
Wayne. 

Webster  
Wheeler 

York  

Totals.. 

379,926 

100% 

$2.530.011 

$18.816.601 

100% 

$3,671,384 

152  Report  of  Nebraska  Tax  Commission 

We  have  not  been  able  to  give  the  problems  involved  enough 
study  to  warrant  our  making  recommendations  for  legislation 
on  this  subject.  We  have,  however,  collected  some  data  bearing 
on  the  operation  of  the  two  plans  of  dealing  with  the  railroad 
taxes  which  have  been  most  frequently  discussed  before  the  Com- 
mission, namely:  (I)  The  plan  of  turning  the  railroad  taxes  into ' 
the  general  fund  of  the  state  treasury;  and  (II)  the  plan  of  col- 
lecting the  railroad  taxes  at  the  state  treasury  and  apportioning 
them  to  the  counties  on  the  basis  of  the  school  population.  The 
results  of  this  study  are  presented  in  the  table  which  follows. 
The  table  contains  also  (III)  a  statement  of  the  effect  of  substitut- 
ing the  "local  expenditures"  (to  be  explained  later)  for  "the 
value  of  property"  as  a  basis  for  determining  the  amount  of  state 
taxes  to  be  raised  in  each  county.  The  table,  therefore,  is  really 
a  consolidation  of  three  tables  brought  together  for  easier  compari- 
son. 

Explanation  of  the  Tables. — It  will  be  best  to  deal  with 
each  of  the  plans  covered  by  the  tabte  in  turn : 

I.  DIVERT  THE  RAILROAD  TAXES  TO  THE  USE  OF  THE 
STATE. — This  would  be  a  step  in  the  direction  of  separation.  No 
plan  of  separation  can  leave  the  local  governments  this  source  of 
revenue.  But  as  conditions  now  stand  the  railroad  taxes  added 
to  the  state's  special  sources  of  revenue  would  not  supply  its  needs. 
In  1913,  in  addition  to  fees,  licenses,  earnings,  grants  and  special 
taxes  going  into  the  state  treasury,  a  levy  of  7.8  mills  for  state 
purposes  had  to  be  made  upon  the  general  property  of  the  state 
and  there  was  charged  to  the  counties  the  sum  of  $3,671,384 
(column  3).  The  railroad  taxes  that  year  amounted  approxi- 
mately to  $2,530,011.  This  is  the  amount  paid  by  the  seven 
principal  railway  companies  on  the  general  railway  valuation 
and  the  terminal  valuation.  Additional  taxes  were  paid  by  most 
of  these  companies  on  property  situated  outside  the  right-of-way 
and  assessed  locally.  These  would  under  any  circumstances 
remain  subject  to  local  taxation  and  are  not  here  considered.  The 
taxes  of  a  few  companies  running  into  the  state  usually  on  leased 
tracks  are  not  included.  Their  omission,  however,  does  not 
materially  affect  the  result  even  in  Douglas  county  where  they 
are  chiefly  paid.  The  railroad  taxes,  as  will  be  seen,  lack  $1,141,- 
373  of  furnishing  the  state  with  its  necessary  funds.  If  the  state 
bad  absorbed  the  railroad  taxes  it  would  still  have  been  necessary 


Explanation  af  Tables  153 

to  levy  this  amount  on  what  may  be  called  "local  property," 
i.  e.  the  total  valuation  (column  1),  minus  the  railroad  valuation 
(column  2).  It  would  have  required  a  levy  of  2.75  mills  on  "local 
property"  to  raise  the  $1,141,373  (column  8). 

How  the  several  counties  would  be  affected  by  the  diversion 
of  the  railroad  taxes  to  the  state  may  be  illustrated  by  examining 
typical  cases.  Adams  county  was  charged  in  1913  $59,726  on  a 
valuation  of  $7,657,232.  A  part  of  this  valuation  represented 
railroad  property,  $980,802,  on  which  the  state  levy  pf  7.8  mills 
yielded  a  tax  of  $7,650  (column  6).  The  state  tax  on  "local 
property"  was  $59,726  less  $7,650  or  $52,076.  But  the  local 
governments  enjoyed  a  revenue  of  $32,903  from  the  railroad  tax. 
If  the  railroad  taxes  had  been  enough  to  supply  the  state  treasury 
this  county  by  giving  up  its  share  of  the  railroad  tax  $32,903 
would  have  been  relieved  of  a  state  tax  on  local  property  of 
$52,076,  and  would  have  been  the  gainer  by  the  difference,  or 
$19,173  (column  7).  But  the  state  would  have  been  compelled 
in  1913  to  levy  2.75  mills  on  the  "local  property"  of  the  county 
which  would  have  yielded  a  revenue  to  the  state  of  $18,360.  So 
that  county  would  be  the  gainer  by  diverting  the  railroad  taxes 
to  the  state  by  the  difference,  or  $814  (column  9). 

Banner  county  has  no  railroad.  It  was  charged  $3,406  state 
taxes.  By  diverting  the  railroad  tax,  the  state  levy  would  be 
reduced  to  2.75  mills  and  its  state  taxes  would  be  only  $1,202,  a 
gain  by  the  change  of  $2,206. 

Blaine  county  would  have  lost  by  the  change  $5,235,  for  it 
would  have  lost  $4,136  by  its  surrender  of  the  railroad  tax  and 
its  share  of  the  required  levy  would  increase  the  loss  by  that 
amount  ($1,099). 

Columns  9  and  10  show  the  gain  or  loss  which  would  have 
resulted  in  each  county  by  turning  the  railroad  tax  to  state  pur- 
poses. The  results  would  be  modified  but  slightly  if  the  Pullman 
taxes  which  we  recommend  for  state  revenue  had  been  included 
in  the  calculation.  We  have  no  information  as  to  the  amount 
of  express  and  insurance  company  taxes  paid  in  each  county. 
The  changes  which  would  result  from  withdrawing  these  taxes 
from  local  use  would  no  doubt  in  some  cases  change  a  loss  into 
a  gain  but  the  results  would  not  greatly  differ  from  those  shown 
in  the  table. 


154  Report  of  Nebraska  Tax  Commission 

II.  SUBSTITUTE  "SCHOOL  POPULATION"  FOR  "RAILROAD 
VALUATION"  AS  A  BASIS  FOR  APPORTIONING  THE  RAILROAD 
TAXES. — This  of  course  is  not  a  plan  for  separation  of  sources. 
It  retains  the  railroad  taxes  for  local  use  but  seeks  to  distribute 
their  benefits  more  widely.    Advocates  of  the  plan  are  usually 
not  very  definite  as  to  the  method  of  division.    The  plan  is  often 
supported  by  the  argument  that  the  children  of  a  non-railroad 
district  are  entitled  to  a  share  of  the  railroad  tax  in  the  county. 
In  all  fairness  this  argument  must  be  extended  in  the  interest 
of  those  children  in  counties  which  have  no  railroads  and  the 
table  (II)  is  constructed  on  this  theory.    The  four  counties  having 
no  mileage  would  have  a  share  of  the  taxes  paid  by  railroads, 
presumably  for  the  use  of  the  schools.     Column  11  shows  the 
school  population  of  each  county,  column  12  the  percentage  of 
such  population,  and  13  the  share  each  county  would  get  on  this 
basis  of  the  $2,530,011  railroad  taxes  paid  in  1918.    Adams  county 
now  receives  for  local  use  $32,903.    Under  the  proposed  plan  it 
would  receive  $42,012;    Banner  county,  which  has  no  railroad, 
would  receive  $2,551;    Hooker  now  has  $1^,987  for  local  uses, 
under  the  proposed  plan  it  would  receive  but  $2,977,  and  so  on. 
Such  a  plan  would  give  to  the  several  districts  within  the  county 
its  quota  based  on  school  population.    We  present  no  statistics 
to  show  how  the  districts  within  the  counties  would  be  affected. 
The  combinations  of  circumstances  are  so  numerous  and  varied 
that  the  change  might  easily  bring  as  great  hardships  as  it  would 
remove.    We  are  so  uncertain  of  the  outcome  that  we  make  no 
recommendation  with  respect  to  this  plan  of  dealing  with  the 
railroad  taxes. 

III.  MAKE  THE  APPORTIONMENT  OF  STATE  TAXES  TO  BE 
RAISED  BY  THE  COUNTIES  ON  THE  BASIS  OF  LOCAL  EXPENDITURES 
INSTEAD  OF  THE  BASIS  OF  VALUATION. — This  plan  has  been  pro- 
posed as  a  means  primarily  of  avoiding  the  evils  of  under-valua- 
tion,  but  it  is  also  supported  on  the  ground  that  the  expenditures 
made  by  the  local  governments  are  a  better  test  of  their  ability 
to  support  the  state  than  the  value  of  property  within  their 
borders.    The  plan  has  been  urged  by  separationists  to  meet  the 
objection  that  any  plan  of  separation  is  likely  to  produce  too 
much  or  too  little  for  the  state's  needs.    Very  well,  it  is  said,  if 
more  comes  to  the  state  than  it  requires,  turn  it  back  to  the  local 
governments  on  the  basis  of  the  amount  they  raise  for  them- 


Explanation  of  Tables  155 

selves;  if  too  little,  call  on  the  local  governments  for  contributions 
on  the  same  basis.  This,  it  is  argued,  would  remove  the  tempta- 
tion to  under- valuation  and  furnish,  a  fairer  basis  than  even  the 
best  of  valuations  would  for  apportioning  expenses. 

We  have  pointed  out  elsewhere  that  to  adopt  any  arrange- 
ment that  would  make  a  good  assessment  of  indifference  to  the 
state  would  be  a  step  in  the  wrong  direction,  and  we  now  have  to 
say  that  we  are  not  convinced  that  local  expenditures  constitute 
any  fairer  test  of  ability  of  a  community  than  the  value  of  prop- 
erty. If  every  government  spent  just  what  it  was  able  to  spend 
and  no  more,  the  argument  would  have  more  weight.  But  every 
one  is  acquainted  with  communities  which  voluntarily  take 
upon  themselves  heavy  burdens  for  local  purposes,  which,  under 
the  proposed  plan,  would  subject  them  also  to  an  unduly  heavy 
tax  for  the  support  of  the  state  as  compared  with  their  more 
parsimonious  neighbors.  Where  attempts  have  been  made  to 
act  on  this  principle,  as  in  Oregon,  it  was  found  necessary  to 
modify  it  by  excluding  one  expenditure  after  another,  and  in 
that  state  the  principle  was  finally  abandoned. 

While  not  recommending  this  method  of  apportioning  the 
tax  burden  upon  the  local  governments,  we  present  in  part  III 
of  the  table  some  data  bearing  upon  its  operation.  We  have  no 
information  as  to  the  expenditures  of  the  local  government  and 
were  compelled  to  fall  back  upon  the  taxes  charged  for  local 
purposes,  for  the  counties  and  other  local  governments,  as  a 
basis  of  computation.  These  fairly,  though  not  exactly,  serve  as 
a  measure  of  expenditure.  Our  statistics  of  taxes  charged  do  not 
show  the  amount  raised  for  the  various  divisions  of  government, 
so  that  columns  14,  15  and  16  show  respectively  the  total  of 
local  taxes  charged  for  all  governmental  divisions  in  each  county, 
the  per  cent  of  the  total,  and  the  amount  of  the  state  tax  of  1913 
if  it  had  been  apportioned  on  the  basis  of  these  taxes  representing 
roughly  the  expenditures.  Thus  Adams  county  was  charged 
$59,726;  under  the  proposed  plan  it  would  have  paid  $61,509. 
Douglas  was  charged  $354,794;  under  the  proposed  plan  it  would 
have  paid  $601,862.  York  was  charged  $70,803;  under  the  pro- 
posed plan  it  would  have  paid  only  $49,158. 

A  Feasible  Plan  of  Separation. — If  deemed  desirable  to 
adopt  a  plan  of  separation  it  could  be  accomplished  by  diverting 
to  the  state's  use  the  following  taxes:  Those  arising  from  the 


156  Report  of  Nebraska  Tax  Commission 

express,  Pullman,  telegraph,  insurance  and  the  railroad  com- 
panies, and  from  the  proposed  flat  rate  on  intangibles.  We 
recommend  for  reasons  set  forth  in  discussing  the  taxation  of  the 
first  four  classes  of  corporations  that  the  revenue  derived  from 
them  in  any  case  be  turned  into  the  state  treasury.  As  pointed 
out  above  there  are  ample  grounds  in  the  nature  of  the  railroad 
taxes  for  turning  them  into  the  state  treasury  and  we  are  de- 
terred from  recommending  it  only  because  of  the  disturbance  it 
would  create  in  the  financss  of  many  local  governments.  There 
seems  no  especial  reason  for  turning  the  proposed  tax  on  intangi- 
bles to  the  use  of  the  state  except  that  more  revenue  is  needed 
and  that  this  tax  would  probably  supply  it. 


Problems  of  Administration  157 


CHAPTER  VIII 

PROBLEMS  OF  ADMINISTRATION 

Conditions  Prior  to  1903. — The  revision  of  the  revenue 
law  in  1903  was  confined  chiefly  to  improvements  in  administra- 
tion. The  most  important  change  made  at  that  time  was  the 
creation  of  the  office  of  county  assessor.  Previously  assessments 
had  been  made  by  a  precinct,  township,  city  or  village  assessor, 
as  the  case  might  be.  These  officers  were  elected  annually  and 
were  empowered  to  appoint  deputies  to  assist  in  the  work.  The 
experience  under  this  plan  was  not  different  from  that  in  other 
states  having  widely  decentralized  authority  in  assessment.  Each 
assessor  was  in  a  very  real  way  a  law  unto  himself.  He  was 
formally  responsible,  it  is  true,  to  local  boards  of  review,  but 
practically  he  exercised  authority  with  a  free  hand.  The  result 
was  too  often  effective  brow-beating  by  the  strong  tax-payer,  a 
weak  yielding  on  the  part  of  the  assessor  to  political  and  personal 
influences,  under- valuation,  evasion,  and  on  the  whole  an  intoler- 
able inequality  in  the  assessments.  Under  such  a  system  one  in- 
competent or  wilfully  unfair  assessor  could  debase  not  only  his 
own  assessment  but  that  of  the  whole  county.  His  action  it  is 
true  was  not  final.  In  counties  having  township  organization  the 
town  board  and  the  assessor  sitting  as  a  board  of  review  had 
power  to  raise  and  lower  assessments,  and  thus  served  as  a  check 
upon  carelessness  arid  dishonesty,  and  the  county  board  could 
hear  appeals  from  the  town  board,  and  in  counties  under  the 
supervisor  system  take  up  original  complaints;  but  in  spite  of 
these  boards  of  review  the  assessor  did  his  w^ork  with  practically 
a  free  hand. 

The  Reform  of  1903;  the  County  Assessor  System.— 
The  legislature  of  1903  seems  to  have  been  impressed  with  the 
fact,  now  generally  recognized,  that  unless  the  original  assess- 
ment is  fairly  made,  inequality  in  bearing  the  tax  burden  is 
certain.  As  one  commission  has  said:  "The  germ  of  inequitable 
taxation  finds  its  origin  in  the  local  assessment.  Every  sub- 
sequent step  in  its  progress  to  a  completed  tax  roll  nourishes  its 
feverish  growth  until  it  develops  into  a  widespread  disease  poison- 


158  Report  of  Nebraska  Tax  Commission 

ing  the  whole  system  of  taxation."  To  depend  upon  equaliza- 
tion as  a  remedy  for  a  poor  assessment,  except  in  a  few  cases,  is 
to  lean  on  a  broken  reed.  The  great  reform  of  1903  was  in  the 
direction  of  improving  the  original  assessment.  The  county 
assessor  was  made  the  responsible  supervisor  of  assessments  for 
the  whole  county.  The  county  board  determined  the  number  of 
assistants  needed,  and  these  with  the  consent  of  the  county  board 
were  appointed  by  the  county  assessor  as  his  "deputies"  and  held 
office  at  his  pleasure.  The  work  of  the  deputies  was  made  subject 
to  the  supervision  and  direction  of  the  assessor.  It  was  his  duty 
to  require  uniformity  in  valuations;  to  examine  the  schedules 
and  the  rolls  to  see  that  they  were  correct;  to  alter  assessments 
made  by  deputies  so  that  they  should  "conform  to  law."  He 
was  also  required  to  examine  the  records  in  the  various  county 
offices  for  information  that  would  lead  to  the  proper  listing  of 
mortgages,  liens,  judgments,  and  other  property  of  those  under 
guardianship. 

The  State  Board  of  Equalization. — Important  changes 
were  made  in  the  State  Board  of  Equalization.  It  had  been  com- 
posed of  the  governor,  auditor  of  public  accounts,  and  treasurer. 
It  was  enlarged  by  adding  to  it  the  secretary  of  state  and  the 
commissioner  of  public  lands  and  buildings  and  provision  was 
for  the  first  time  made  for  a  paid  secretary.  The  new  law  changed 
the  name  of  the  board  to  its  present  form — the  "State  Board  of 
Equalization  of  Assessment."  Its  work  of  equalization  was  made 
more  effective.  Prior  to  1903  equalization  could  be  effected 
only  "by  varying  the  rate  of  taxation  on  the  different  counties" 
in  case  valuations  had  not  been  made  "with  reasonable  uni- 
formity." The  new  law  required  equalization  by  the  more  direct 
method  of  changing  the  valuations,  but  this  could  be  done  only 
by  raising  or  lowering  the  whole  valuation  of  the  county.  This 
crude  arrangement  was  modified  in  1905  by  giving  the  power  to 
raise  or  lower  the  values  of  particular  kinds  of  property. 

The  authority  of  the  Board  was  somewhat  increased  in  the 
matter  of  assessments.  The  method  of  valuing  railroad  and  car 
companies  was  more  fully  specified  and  the  information  to  be 
given  by  the  companies  was  required  in  greater  detail  with  the 
purpose  apparently  of  reaching  intangible  values.  Larger  super- 
visory power  was  given  over  the  revenue  system.  The  Board  is 


The  State  Board  of  Equalization  159 

required  to  "provide  a  uniform  method  of  keeping  all  books  relat- 
ing to  taxation  in  the  several  counties  of  the  state.  It  shall  formu- 
late and  send  to  the  county  clerk  of  each  county  all  necessary 
forms  to  be  used  in  the  listing,  assessment  and  return  of  property, 
and  in  the  levy  and  collection  of  taxes.  It  shall  have  general 
direction  and  control  of  the  county  assessors  in  the  performance 
of  their  duties,  and  shall  direct  the  same."  The  county  assessor 
is  specifically  required  to  obey  the  instructions  sent  out  by  the 
state  board. 

Here  was  a  sufficient  grant  of  authority,  it  would  seem,  for 
an  aggressive  board  to  exercise  a  powerful  control  over  the  ma- 
chinery of  assessment.  But  the  board  from  its  composition 
could  hardly  be  expected  to  be  aggressive,  and  where  it  has  shown 
such  a  spirit  the  courts  and  the  legislature  have  placed  a  check 
upon  it.  Thus  in  1906  the  board  ordered  a  county  assessor  to 
place  on  the  rolls  certain  property  which  had  been  omitted. 
The  order  was  obeyed,  but  the  county  board  of  equalization, 
upon  hearing,  removed  the  property,  whereupon  the  governor 
asked  the  supreme  court  to  issue  an  order  for  its  restoration  to' 
the  assessment  roll.  The  court  held  that  the  board  was  not  an 
assessing  body,  that  it  had  nothing  to  do  with  individual  assess- 
ments directly  and  that  it  could  not  "direct  the  county  assessor 
as  to  what  valuation  he  shall  put  upon  property  and  so  accom- 
plish indirectly  what  the  board  cannot  do  directly."  State  v. 
Drexel,  75  Neb.  751,  754. 

The  law  requires  the  board  to  equalize  the  assessments  as 
between  counties  so  "as  to  make  the  same  conform  to  law  and 
for  that  purpose  shall  have  the  power  to  increase  or  decrease  the 
assessed  valuation  of  any  county."  The  supreme  court  held  in 
1904  that  while  the  board  could  raise  the  assessment  of  any 
county  as  an  incident  to  equalization,  it  could  not  raise  the 
valuations  for  the  purpose  of  increasing  the  aggregate  assessment. 
Hacker  v.  Hcwe,  73  Neb.,  385.  In  1£09,  after  a  period  of  political 
agitation  over  the  matter,  the  legislature  unfortunately  amended 
the  law  by  forbidding  the  board,  in  a  half-hearted  way,  to  increase 
the  aggregate  assessment  beyond  the  amount  returned  by  the 
county  assessors,  unless  it  shall  appear  "that  a  just,  equitable 
and  legal  assessment  cannot  otherwise  be  made."  The  purpose 
of  the  amendment  was  to  place  a  check  upon  the  Board,  though 


160  Report  of  Nebraska  Tax  Commission 

the  way  still  lies  open  for  it  to  do  within  the  law,  practically  all 
it  could  before  the  amendment  was  adopted. 

Effect  of  the  Act  of  1903.— Here  for  the  first  time  in  1903 
was  provided  a  tolerably  effective  organization  for  making  an 
assessment.  How  efficient  it  was  is  shown  by  the  returns  for 
1904,  the  first  year  the  new  law  was  in  operation.  The  old  law 
had  required  assessments  to  be  made  at  the  full  value  of  the 
property.  In  1903,  the  last  year  under  the  old  order  the  assessed 
valuation  for  the  state  was  $188,458,379.  While  the  new  law 
provided  that  property  should  be  assessed  at  20  per  cent  of  its 
"actual  value,"  the  grand  assessment  roll  in  1904  amounted  to 
$294,  779,245,  showing  an  "actual  value"  of  $1,273,896,225.  The 
assessed  value  of  railroad  property  was  raised  in  the  first  year 
from  $27,284,946  on  a  supposed  full  valuation,  to  $46,082,853  on 
a  one-fifth  valuation.  The  grand  assessment  roll  has  continued  to 
increase  during  the  past  decade,  though  probably  not  as  fast  as 
wealth  has  increased  till  it  stood  in  1913  at  $470,690,414  represent- 
ing an  "actual  value"  of  $2,353,452,070.  What  has  been  accom- 
plished by  way  of  equalizing  the  tax  burden  cannot  of  course  be 
measured. 

Devitalization    of   the    Law;     the   County   Assessor.— 

During  the  decade  the  law  has  been  in  force  the  tendency  in  leg- 
islation has  been  to  weaken  rather  than  strengthen  the  administra- 
tion. The  office  of  county  assessor  has  been  attacked  in  a  variety 
of  ways: 

1.  The  legislature  of  1909  took  the  backward  step  of  making 
the  local  assessors  elective  once  more.  They  are  no  longer 
"deputies"  but  "precinct  assessors,"  elected  for  a  term  of  two 
years,  and  ineligible  to  serve  more  than  two  terms  in  succession. 
Admitting  for  the  moment  that  as  good  men  are  secured  by  elec- 
tion as  by  appointment,  there  is  yet  this  to  be  said  against  elec- 
tive assessors:  (1)  They  are  subject  to  "local  influence"  to  a 
greater  extent  than  appointed  officers,  and  (2)  are  less  amenable 
to  a  central  authority.  The  legislature  of  1911  corrected  the 
evil  in  some  degree  by  providing  that  in  counties  having  cities  of 
more  than  4,000  population  the  people  of  such  cities  shall  elect 
on  a  general  ticket  the  number  of  assessors  decided  upon  by  the 
county  board  and  the  county  assessor  to  be  necessary,  and  that 
they  shall  be  assigned  by  the  county  assessor  to  their  respective 


Effect  of  the  Act  of  1903  161 

districts.  At  the  session  of  1913  the  original  provision  for  the 
appointment  of  deputies  by  the  county  assessor  was  restored  in 
cities  of  over  4,000  population. 

2.  The  legislature  of  1909  crippled  the  authority  of  the 
county  assessor  in  another  way.    The  deputies  had,  prior  to  1909, 
been  required  to  turn  in  their  personal  property  schedules  as 
fast  as  made  out  and  these  were  entered  upon  the  roll  by  the 
county  assessor.    This  gave  the  assessor  the  means  of  real  super- 
vision intended  by  the  law;    but  an  amendment  in  1909  per- 
mitted the  local  assessor  to  make  up  the  roll  and  keep  it  and  all 
schedules  in  his  possession  till  the  assessments  were  all  made. 
This  left  no  possibility  for  supervision  or  even  for  a  proper 
inspection  of  the  books  before  they  had  to  be  turned  over  to  the 
county  board  of  equalization.     This  destructive  provision  was 
modified  in  1911  and  the  law  now  requires  the  precinct  assessor 
to  turn  in  his  schedules  "from  time  to  time"  to  the  county 
assessor  who  is  to  make  up  the  books  in  his  office.    The  times 
for  returning  schedules,  however,  is  still  discretionary  with  the 
precinct  assessor. 

3.  The  legislature  of  1911    made  another  breach  in  the 
county  assessor  system  by  giving  the  voters  of  any  county  the 
option  at  any  general  election  of  turning  the  duties  of  assessor 
over  to  the  county  clerk.     Thus  far  twelve  counties  have  dis- 
pensed with  the  office  and  it  seems  quite  likely,  unless  checked, 
that  other  counties  will  do  the  same.    As  far  as  the  movement  to 
supplant  the  county  assessor  grows  out  of  a  demand  for  true 
economy  it  is  worthy  of  commendation.    Indeed,  there  is  much 
to  say  in  favor  of  combining  all  those  functions  of  a  financial 
character  in  one  county  finance  officer.     Such  a  consolidation 
of  county  officers  would  go  far  toward  promoting  order  in  the 
county  finances.    It  would  make  possible  the  choice  of  a  finance 
officer  of  large  experience,  ensure  the  better  utilization  of  the 
clerical  force  in  the  county  offices,  and  probably  a  more  econom- 
ical administration. 

But  we  do  not  think  the  change  authorized  by  the  amend- 
ment of  1911  has  been  in  the  interest  of  economy.  We  have  not 
been  able  to  secure  complete  information  as  to  the  saving  effected 
in  the  counties  which  have  made  the  change  and  the  fact  that 
the  change  was  in  most  cases  made  in  1911  or  1912,  thus  involving 
6 


162  Report  of  Nebraska  Tax  Commission 

the  year  when  real  estate  was  assessed,  introduces  a  disturbing  fac- 
tor. On  their  face,  however,  the  figures  for  the  counties  for  which 
we  have  full  returns  show  a  saving  ranging  from  $91.00  to  $896, 
and  the  average  saving  for  these  counties  was  $373.00  a  year. 
The  average  number  of  precinct  assessors  in  the  counties  report- 
ing was  sixteen.  It  would  be  in  the  interest  of  true  economy  and 
efficiency  to  dispense  with  the  precinct  assessors  and  let  the 
county  assessor  make  the  valuations.  In  a  Missouri  county  of 
35,000  population  where  10,000  personal  schedules  are  required 
and  17000  parcels  of  real  estate  are  assessed,  representing  property 
worth  $38,000,000,  a  county  assessor  made  the  assessment  in 
1914  with  the  aid  of  one  field  assistant  and  two  clerks,  the  latter 
employed  for  two  months  only.  Under  a  true  county  assessor 
system  the  wholly  inadequate  per  diem  now  paid  to  precinct 
assessors  could  be  turned  toward  the  payment  of  an  officer  who 
would  be  at  his  task  throughout  the  year. 

Thus  far  we  have  assumed  that  the  county  clerk  could 
supervise  assessments  as  well  as  an  assessor.  This  will  rarely 
be  the  case.  The  theory  upon  which  the  office  of  county  assessor 
rests  is  that  it  will  by  its  greater  efficiency  in  getting  property  on 
the  schedule  and  securing  its  proper  valuation  pay  for  its  upkeep. 
In  many  cases  this  is  done  many  times  over.  One  office  which 
took  especial  care  to  make  a  complete  assessment  in  1914  found 
enough  property  after  the  books  had  been  sent  to  the  county 
board  to  yield  taxes  more  than  sufficient  to  pay  the  total  annual 
expense  of  the  office.  This  kind  of  work  is  hardly  to  be  expected 
of  a  county  clerk,  usually  absorbed  in  the  duties  of  his  own  office. 
It  seems  clear,  therefore,  that  much  of  the  hostility  to  the  county 
assessor  system  has  not  had  the  desire  for  economy  or  efficiency 
for  its  motive.  In  many  quarters  it  is  opposed  because  it  is  too. 
efficient,  because  of  its  power  to  hold  precinct  assessors  to  the 
performance  of  their  duties.  We  cannot,  therefore,  but  regard 
the  law  permitting  the  abolition  of  the  office  of  county  assessor  as 
a  backward  step.  True  reform  of  administration  lies  in  restoring 
the  office  and  strengthening  it. 

Recommendations. — The  law  of  1903  created  the  office 
of  supervisor  of  assessments  rather  than  that  of  county  assessor. 
We  recommend  that  he  be  made  assessor  in  fact  as  well  as  in 
name  of  all  the  property  subject  to  local  taxation  except  such 
forms  as  are  assessed  by  the  state  board  or  the  proposed  tax 


Recommendations  163 

commission.  We  believe  that  it  would  be  in  the  interest  of  good 
administration  to  have  the  office  filled  by  appointment  rather 
than  by  election,  the  assessor  to  serve  without  limit  of  term,  but 
subject  to  removal  for  cause. 

The  position  is  a  purely  administrative  one,  and  ought 
to  be  removed  as  far  as  possible  from  political  influence.  There 
is  no  more  reason  that  the  people  of  the  county  should  elect  the 
county  assessor  than  that  the  people  of  a  city  should  elect  the 
city  engineer.  We  recognize,  however,  the  deep-seated  popular 
prejudice  that  exists  against  giving  up  the  right  of  election, 
and  recommend  that  the  office  be  filled  as  now  by  election  for  a 
term  of  four  years;  that  the  assessor  be  authorized  to  appoint 
such  deputies  as  may  be  required;  that  such  assessments  as  are 
made  by  the  deputies  shall  be  made  in  the  name  of  the  assessor 
and  subject  to  change  by  him.  The  county  assessor  should  be 
subject  to  removal  for  cause  by  the  county  board,  and  also  by 
the  state  tax  commission.  If  the  county  assesor  makes  his  valua- 
tion of  real  property  in  accordance  with  modern  practices  and  is 
diligent  in  collecting  data  which  will  assist  him  in  making  a  proper 
personal  assessment,  there  need  be  no  objection  to  the  office  on 
the  ground  that  it  has  no  duties  except  during  two  months  in 
the  year  when  the  schedules  are  being  made  up.  There  will  be 
sufficient  employment  throughout  the  year 

Central  Control  of  Local  Assessments  in  Other  States. 

This  recommendation  stops  short  of  what  is  being  done  in  states 
where  a  serious  effort  is  being  made  to  secure  efficient  machinery 
of  assessment.  Bills  have  been  introduced  in  the  legislatures  of 
Kansas  and  Minnesota  for  making  the  county  assessor  appointive 
by  a  central  authority.  In  Ohio  this  has  been  accomplished.  By 
an  act  of  1913  each  county  was  made  an  assessment  district.  In 
counties  of  less  than  65., 000  population  one  "deputy  state  tax 
commissioner"  to  be  known  as  the  district  assessor  is  appointed 
by  the  governor,  to  serve  without  term,  but  subject  to  removal  by 
the  state  tax  commission,  with  the  consent  of  the  governor.  In 
the  larger  counties  two  such  district  assessors  are  appointed.  The 
district  assessor  has  power  to  appoint  such  number  of  deputies 
and  assistants  as  may  be  prescribed  by  the  State  Tax  Commis- 
sion, and  in  his  name  all  assessments  are  made.  The  old  system 
of  equalization  by  a  county  board  elected  for  other  purposes  and 


164  Report  of  Nebraska  Tax  Commission 

charged  with  other  duties  is  abolished  and  a  "Board  of  Com- 
plaints," composed  of  three  members,  is  appointed  annually  by 
the  state  Tax  Commission  with  the  consent  of  the  governor,  to 
hear  complaints  and  review  assessments.  This  board  has  power 
to  increase  or  decrease  valuations  on  complaint  or  on  its  own 
initiative,  but  appeal  may  be  taken  from  its  decisions  to  the  state 
Tax  Commission.  The  commission  prescribes  all  forms  used  by 
the  district  assessor  and  the  Board  of  Complaints  and  their  work 
is  subject  to  its  supervision  at  every  turn. 

In  Wisconsin  the  old  elective  assessor  system  has  been 
abolished  and  the  duties  formerly  performed  by  them  are  now  per- 
formed by  the  state  Tax  Commission  or  by  the  income-tax  asses- 
sors appointed  by  it.  In  view  of  these  developments  the  recom- 
mendations we  make  for  strengthening  the  office  of  county 
assessor  must  be  regarded  as  very  moderate. 

A  Permanent  Tax  Commission 

Since  1900  the  number  of  states  having  a  permanent  tax 
commissioner  or  a  board  of  commissioners  charged  with  the 
duty  of  administering  the  tax  laws  and  studying  their  operation 
has  increased  from  half  a  dozen  till  now  more  than  half  the  states 
have  such  a  body.  So  remarkable  a  change  in  all  sections  of  the 
country  must  be  due  to  some  common  cause.  We  have  no  doubt 
that  this  cause  is  found  in  the  increasing  tax  burden  of  which 
complaint  is  well  nigh  universal,  and  in  the  desire  to  find  some 
way  of  adjusting  that  burden  so  as  to  distribute  its  weight  more 
equitably.  The  old  boards  of  equalization,  which  the  new  boards 
are  superseding,  had  very  limited  powers  and  these  were  exercised 
by  men  brought  together  temporarily  for  that  purpose,  often 
withdrawn  for  the  time  being  from  other  public  duties  to  perform 
a  service  for  which  they  had  no  special  fitness.  These  old  boards, 
of  which  our  own  is  an  example,  no  longer  meet  the  demands  of 
efficient  administration.  Moreover  it  has  come  to  be  recognized 
that  the  most  vital  part  of  the  taxing  machinery  is  that  which 
has  to  do  with  the  original  assessments  and  that  to  secure  equity 
in  them  effective  centralized  control  is  necessary. 

We  have  become  thoroughly  convinced  that  no  important 
improvement  in  the  tax  system  of  this  state  can  be  made  without 


A  Permanent  Tax  Commission  165 

providing  for  a  permanent  tax  commission.     There  are  three 
main  functions  for  such  a  commission: 

I.  To  ASSESS  DIRECTLY  A  NUMBER  OF  CLASSES  OF  PROP- 
ERTY  FOR    VALUING    WHICH    THE    LOCAL    ASSESSORS   HAVE 
INSUFFICIENT    INFORMATION.— For     many     years     the     need 
of    a    central    body     to    value    railroad    property     has    been 
recognized  in  this  state   as    elsewhere.      But     there    is    equal 
need      for      assessing     telegraph,      telephone      and      express 
companies  also  on  the  unit  plan.     In  fact,  all  public  service 
corporations  should  be  valued  by  a  state  board  even  though  the 
operations  of  such  corporations  all  lie  within  one  taxing  juris- 
diction.   The  acurate  valuation  of  such  property  requires  skill 
and  special  knowledge  which  the  county  assessor's  office  does  not 
possess.    The  same  may  be  said  of  bank  shares.    The  constitution 
requires  them  to  be  assessed  according  to  their  value  and  this 
value  depends  on  a  variety  of  conditions  which  can  be  best  dealt 
with  by  a  central  body,  not  only  because  of  wider  knowledge  and 
experience,  but  because  the  banks  will  the  more  willingly  disclose 
the  data  necessary  for  making  an  accurate  valuation  to  a  state, 
than  to  a  local  officer.    Again,  if  we  are  to  reach  the  intangible 
values  of  corporations,  it  must  be  reached  through  a  state  board. 
Likewise  if  our  recommendation  for  a  central  administration  of 
the  inheritance  tax  is  acted  upon  favorably  a  state  board  will  be 
the  natural  authority  to  administer  it,  and  if  we  are  to  look 
forward  to  the  enactment  of  an  income  tax  law,  a  commission 
must  be  provided  for  to  administer  it. 

II.  IN  THE  SECOND  PLACE  A  STATE  BOARD  is  NEEDED  TO 
SUPERVISE  THE  ASSESSMENT  OF  ALL  PROPERTY  ASSESSED  LOCAL- 
LY AND  TO  EQUALIZE  THE  ASSESSMENTS  AS  BETWEEN  COUNTIES.— 
It  cannot  be  too  strongly  urged   that  the   beginning  of  tax 
reforms  lie  in  improving  the  original  assessment.     We  believe 
that  the  changes  proposed  in  the  powers  of  the  county  assessor 
will  prove  strongly  conducive  to  that  end.    Relieve  that  officer 
from  the  necessity  of  attempting  impossible  tasks,  such  as  finding 
intangibles  subject  to  confiscatory  rates  and  assessing  the  value 
of  franchises;  then  make  him  the  responsible  assessing  officer  of 
the  county  with  power  not  only  to  supervise  the  work  of  his 
deputies,  but  also  to  substitute  his  own  valuations  for  theirs, 
and  a  great  stride  in  advance  will  have  been  made.    The  law  now 
recognizes  the  need  of  equalizing  valuations  among  the  ninety- 


166  Report  of  Nebraska  Tax  Commission 

three  counties  of  the  state,  but  it  makes  no  provision  for  effective 
supervision  of  the  assessments  as  they  are  being  made.  State  super- 
vision over  the  counties  is  as  essential  as  county  supervision  is 
over  local  assessors.  There  is  no  way  of  securing  equality  among 
different  counties  and  as  between  different  classes  of  property, 
except  through  central  control.  Take  the  assessment  of  real 
estate,  by  far  the  most  important  item  in  the  grand  assessment 
roll,  as  an  example  of  the  inequalities  that  exist  after  equalization 
by  both  the  county  and  the  state  boards.  The  tables  (p.  64) 
show  great  undervaluation  and  at  very  unequal  rates  in  different 
counties.  Suppose  each  county  assessor  to  have  adequate  power 
to  keep  up  the  valuations  in  his  county,  he  is  not  likely  to  do  so 
unless  he  is  certain  the  same  will  be  done  in  other  counties.  At 
present  he  is  left  to  guess  on  the  rate  at  which  other  assessors 
will  undervalue.  Thus  in  1914,  officials  from  certain  counties 
who  appeared  before  the  State  Board  of  Equalization  and  Asses- 
ment,  clearly  showed  that  they  had  assumed  the  State  Board's 
functions  in  equalizing.  It  should  be  one  of  the  important 
functions  of  a  permanent  tax  commission  to  collect  accurate 
information  on  the  subject  of  relative  values  to  guide  the  assessors 
and  aid  it  in  its  work  as  an  equalizing  board.  Such  information 
would  be  supplied  by  complete  compilations  of  sales  in  all  parts 
of  the  state,  the  records  of  the  probate  courts,  the  maps  of  the 
topographical  and  soil  surveys,  as  fast  as  completed,  and  from 
such  other  sources  as  the  board  could  utilize.  The  board's  duty 
should  not  stop  with  supplying  information.  It  should  have  the 
power  to  supervise  the  assessment.  We  have  discussed  elsewhere 
in  this  report  the  various  devices  coming  into  use  for  aiding  in 
making  an  accurate  assessment,  such  as  land  maps,  tax  maps, 
the  use  of  transfer  records,  publicity  of  assessments,  and  the 
utilization  of  expert  knowledge  in  the  community  in  establishing 
unit  values.  These  are  aids  which  cannot  safely  be  prescribed  by 
law.  They  are  of  the  nature  of  office  methods,  details  of  admin- 
istration and  the  only  practicable  way  of  securing  their  general 
use  is  through  regulations  established  and  enforced  by  some 
common  authority. 

The  present  Board  of  Equalization  and  Assessment  was  not 
designed  for  such  work.  It  has  not  the  accurate  information 
needed  for  an  aggressive  policy  in  using  the  power  it  clearly  has. 
It  is  limited  in  its  authority  to  raise  the  total  assessment  beyond 


Functions  of  Tax  Commission  167 

the  aggregate  fixed  by  the  county  assessors.  In  equalizing,  there- 
fore, it  must  frequently  reduce  the  value  of  items  in  counties  where 
they  are  admittedly  listed  at  only  a  fraction  of  their  true  value. 
In  this  way  the  board  is  crippled  in  the  assessment  of  property 
lying  wholly  within  its  jurisdiction.  Year  after  year  the  repre- 
sentatives of  the  railways  appear  before  the  board  and  argue  that 
the  board  should  violate  their  oath  of  office  by  reducing  the  true 
value  found  for  the  railway  property  of  the  state  to  conform  to 
the  under-valuation  of  real  property  in  counties  through  which 
the  railways  pass.  In  Wisconsin  when  the  state  tax  commission 
undertook  to  value  railway  property,  it  met  the  same  situation, 
and  it  was  found  necessary  in  order  that  equality  might  be  pre- 
served between  railway  and  other  property,  to  secure  the  right 
to  make  its  own  valuations  of  property  throughout  the  state. 
The  need  of  a  central  supervision  over  the  assessment  of  all 
property  in  this  state  is  no  less  imperative. 

III.  A  PERMANENT  TAX  COMMISSION  is  NEEDED  TO  STUDY 
THE  OPERATION  OF  THE  REVENUE  LAWS  AND  TO  GIVE 
PUBLICITY  TO  THE  RESULTS  OF  TAX  LEGISLATION.— There 
is  at  present  no  adequate  provision  for  collecting  infor- 
mation about  the  yield  of  the  revenue  system.  For  a  classi- 
fication of  the  revenues  of  the  state  and  local  governments,  the 
Commission  has  had  to  rely  upon  United  States  Census  figures 
now  a  dozen  years  old.  If  one  wants  to  know  the  yield  of  the 
railroad  taxes,  he  must  again  rely  upon  statistics  supplied  by  the 
federal  government  or  upon  the  railways.  No  one  knows  what 
taxes  are  paid  in  the  state  by  the  express  companies,  or  the  in- 
surance companies,  or  the  banks.  The  only  way  to  find  the  yield 
of  the  inheritance  tax  is  to  write  to  each  county  treasurer  for  the 
information.  Until  recently  it  was  no  one's  duty  to  ascertain 
the  amount  of  ad  valorem  taxes  levied  in  the  state  or  to  compute 
the  average  rate  of  taxation.  These  are  items  of  information 
every  citizen  has  a  right  to  have  made  available  for  him.  This 
is  in  line  with  a  resolution  adopted  by  the  National  Tax  Associa- 
tion in  "that  provision  should  be  made  by  every  state  for  the  col- 
lection and  publication  of  statistics  of  assessment,  taxes  and  other 
public  revenue/' 

There  is  obvious  need  of  a  permanent  board  also  to  study 
the  operation  of  the  revenue  law  and  recommend  such  modifica- 
tions as  experience  suggests.  Experiments  outside  the  state  are 


168  Report  of  Nebraska  Tax  Commission 

constantly  being  made,  worthy  of  careful  investigation  and  an 
immense  literature  is  springing  up  which  requires  consideration 
from  those  who  direct  the  revenue  policy  of  the  state.  The  office 
of  the  tax  commission  should  be  a  clearing-house  for  all  sorts 
of  information  not  only  about  our  own  revenue  system.,  but 
about  the  systems  of  other  states  and  countries. 

Recommendations. — Our  conclusion,  therefore,  is  that  a 
permanent  tax  commission  should  be  created  with  large  powers. 
Such  a  commission  should  be  created  whether  the  tax  amendment 
is  adopted  or  not.  Strong  central  supervision  is  needed,  if  for  no 
other  reason,  to  formulate  and  enforce  rules  and  regulations  for 
the  assessment  of  the  real  estate  of  the  commonwealth.  This 
item  alone  now  amounts  to  more  than  $2,000,000,000.  It  is 
assessed  in  the  most  erratic  and  unequal  way.  Personal  property 
taxes  may  in  time  be  swept  away,  but  the  land  taxes  will  con- 
tinue and  probably  become  of  increasing  importance.  It  is  high 
time  the  valuation  of  this  property  should  be  made  with  as  near 
an  approach  to  scientific  accuracy  as  possible.  The  most  direct 
path  to  that  end  is  through  the  creation  of  effective  centralized 
administrative  control. 

The  Form  of  the  Commission. — Twenty-seven  states  now 
have  permanent  tax  commissions.  Of  these,  six,  m.ostly  in  New 
England,  have  the  single  commissioner  system,1  three  are  com- 
posed of  five  members,  part  of  whom  are  ex-officio  members,  and 
seventeen  consist  of  three  members,  usually  appointed  by  the 
governor  for  a  term,  of  six  or  eight  years.  The  best  commissions 
are  placed  in  a  position  of  independence  and  are  freed  as  far  as 
possible  from  political  influence.  Their  work  is  in  no  sense 
political.  It  is  purely  administrative  and  judicial  in  character. 
Their  function  is  to  execute  the  laws  made  by  the  legislature. 

If  the  constitution  permitted  the  creation  of  such  a  commis- 
sion, we  should  have  no  hesitation  in  recommending  one  com- 
posed of  three  members  appointed  by  the  governor  for  a  term  of 

1  The  single  commissioner  system  is  found  in  Connecticut,  Massachusetts, 
Maryland,  Vermont,  West  Virginia  and  Wyoming;  the  five  member  com- 
missions are  in  Indiana,  New  Jersey  and  Oregon;  those  having  three  members 
are  in  Alabama,  Arizona,  Arkansas,  Colorado,  Kansas,  Maine,  Michigan, 
Minnesota,  New  Hampshire,  New  York,  North  Carolina,  North  Dakota, 
Ohio,  Rhode  Island,  Texas,  Washington,  and  Wisconsin. 


The  Form  of  the  Commission  169 

six  years,  and  clothed  with  large  powers.    But  the  constitution, 
after  establishing  certain  state  officers,  provides  as  follows: 

"No  other  executive  state  officer  shall  be  continued  or 
created,  and  the  duties  now  devolving  upon  officers  not  provided 
for  by  this  constitution  shall  be  performed  by  the  officers  herein 
created." 

Under  these  restrictions  it  is  probable  that  the  legislature 
must  be  confined  to  a  choice  of  plans  all  of  which  are  more  or  less 
objectionable'. 

1.  It  has  been  suggested  that  the  powers  of  the  State  Board 
of  Equalization  be  enlarged  so  as  to  give  it  the  authority  of  the 
modern  tax  commission.    We  believe  that  such  a  plan  would  be 
fatal  to  any  real  progress  in  tax  reform.    The  members  of  that 
board  are  political  officers,  chosen  for  short  terms,  and  with  little 
or  no  regard  to  their  interest  in  matters  of  taxation.    A  board  so 
constituted,  however  high  the  merits  of  the  individuals  com- 
posing it,  cannot  be  expected  to  acquire  that  intimate  knowledge 
of  the  problems  of  taxation  demanded  of  a  tax  commission.    The 
real  work  of  such  a  body  would  of  necessity  have  to  be  done  by 
subordinates  not  directly  accountable  to  the  people.  The  board  it- 
self under  the  conditions  could  not  be  held  responsible  for  the 
acts  of  its  subordinates;   and  even  if  it  could  that  responsibility 
would  be  so  divided  as  to  be  of  little  value  as  a  means  of  control. 

2.  Under  the  circumstances  we  recommend  the  general 
form  of  commission  provided  for  in  House  Roll  No.  602  of  the 
session  of  1911.    This  bill  provided  for  the  creation  of  a  tax  com- 
mission to  be  composed  of  the  governor  with  the  title  of  Tax 
Commissioner,  a  deputy  commissioner  and  two  assistants.    This 
plan  should  be  modified  by  providing  for  three  deputy  commis- 
sioners of  equal  rank.     They  should  be  appointed  for  terms  of 
six  years  and  made  removable  only  for  cause,  thus  ensuring 
permanence  in  the  membership.     This  would  tend  to  center 
responsibility  upon  the  governor  and  would  work  in  admirably 
with  the  recommendation  of  the  Joint  Committee  on  Legislative 
Procedure  for  imposing  upon  the  governor  the  duty  of  preparing 
and  placing  before  the  legislature  the  estimates  of  expenditures 
and  income  for  the  state  government.     The  powers  of  such  a 
commission  should  be  as  broad  and  plenary  as  those  of  the  strong 
commissions  in  other  states. 


170  Report  of  Nebraska  Tax  Commission 

The  active  members  on  such  a  commission  should  be  selected 
for  their  special  fitness  for  the  particular  duties  which  would  de- 
volve upon  them.  They  should  give  their  full  time  to  the  work 
of  the  commission  and  should  not  be  hampered  with  other  official 
duties  or  connected  with  other  branches  of  the  public  service. 
They  should  be  men  of  such  standing  that  they  may  assume  all 
the  responsibility  which  would  naturally  go  with  the  position  of 
commissioners  forming  an  independent  board. 

The  Expense. — The  maintenance  of  a  commission  will 
involve  some  additional  expense;  just  how  much  will  depend 
upon  the  nature  of  the  work  assigned  to  it.  The  appropriations 
for  the  Minnesota  commission  are  from  $30,000  to  $35,000  a  year. 
The  expenses  of  the  Ohio  commission  in  1912  amounted  to 
$59,000  and  on  account  of  an  increase  of  duties  it  asked  for 
$71,000  for  the  next  year.  The  Kansas  commission  requires 
$16,700  per  year,  and  North  Dakota  $23,000.  The  Wisconsin 
commission  cost  $25,500  in  1903,  double  that  amount  by  1911 
and  since  the  passage  of  the  income  tax  law,  the  cost  has  risen 
to  more  than  $150,000  a  year.  It  is  probable  that  an  initial 
appropriation  of  $20,000  would  be  required  for  a  commission  in 
Nebraska  and  as  the  duties  of  the  board  is  increased  this  would 
have  to  be  increased  to  perhaps  $35,000  or  $40,000  a  year. 

A  considerable  part  of  this  could  be  saved  by  abolishing  the 
State  Board  of  Equalization  and  turning  the  sums  appropriated 
for  its  use  to  the  use  of  the  Commission,  and  by  placing  the 
administration  of  the  corporation  tax  in  the  hands  of  the  com- 
mission and  dispensing  with  the  clerical  force  in  the  office  of  the 
Secretary  of  State  now  employed  in  administering  the  corpora- 
tion occupation  tax.  But  the  expense  of  a  commission  that 
properly  performs  its  functions  will  be  paid  many  times  over  by 
securing  the  proper  assessment  of  property  which  would  other- 
wise escape  taxation.  This  does  not  mean  that  the  purpose  of  a 
tax  commission  is  to  increase  taxes.  The  amount  of  taxes  is 
determined  by  the  legislative  bodies  authorizing  expenditures. 
The  assessing  machinery,  of  which  the  Commission  would  be  a 
part  has  only  to  do  with  enforcing  the  rules  for  apportioning  the 
burden  of  taxes  among  those  who  have  to  pay  them.  We  believe 
that  no  truer  economy  could  be  practiced  by  the  state  than  in 
making  liberal  expenditures  for  such  a  purpose. 


Income  Taxation  171 


CHAPTER  IX 

INCOME  TAXATION 

Growing  Interest  in  Income  Taxation. — The  successful 
operation  of  the  income  tax  in  European  countries  for  many 
years  has  long  attracted  the  attention  of  students  of  taxation  in 
the  United  States.  England  has  had  an  income  tax  in  continuous 
operation  since  1842  which  now  yields  one  hundred  eighty  or  one 
hundred  ninety  million  dollars  annually,  or  nearly  one  quarter 
of  the  imperial  revenue,  and  more  than  a  quarter  of  the  tax  reve- 
nue. Italy,  Austria,  and  nearly  all  the  German  states  make  use  of 
this  method  of  taxation.  The  federal  government  resorted  to  it 
during  the  Civil  War,  was  kept  from  employing  it  in  1894  only 
by  a  supreme  court  decision  declaring  the  tax  a  direct  one,  and 
since  the  adoption  of  the  sixteenth  amendment,  has  once  more 
made  it  a  part  of  the  federal  revenue  system.  Moreover  about 
twenty  states  at  one  time  or  another  have  levied  taxes  on  incomes 
though  generally  with  such  poor  success  that  till  recently  it  has 
been  generally  discountenanced  as  a  state  tax.  In  the  hearings 
before  the  Commission  it  has  had  numerous  advocates  as  a  part 
of  the  Nebraska  revenue  system.  There  seems  to  be  a  very 
general  sentiment  in  favor  of  an  income  tax. 

Why  an  Income  Tax  is  Desirable. — The  merits  of  the 
income  tax  are  unquestioned.  Among  peoples  well  advanced 
industrially  it  is  an  essential  aid  in  bringing  about  an  equitable 
apportionment  of  the  tax  burden.  (1)  As  a  test  of  ability  it  is 
a  fairer  basis  than  the  value  of  property  upon  which  the  property 
tax  rests  for  the  reasons  pointed  out  elsewhere  that  all  kinds  of 
property  are  not  equally  productive  and  not  equally  indicative 
of  the  ability  of  the  citizen  to  pay  taxes.  (2)  In  the  second 
place  it  is  needed  to  reach  that  considerable  class  of  persons  in 
each  community  who  enjoy  an  income  out  of  all  proportion  to  the 
property  owned.  And  in  the  third  place  it  is  desirable  as  a  sub- 
stitute for  the  troublesome  personal  property  tax. 

That  no  greater  progress  has  been  made  with  this  form  of 
taxation  in  the  American  states  is  not  due  to  any  defect  in  the 


172  Report  of  Nebraska  Tax  Commission 

theory  of  the  tax  but  to  the  practical  difficulties  inherent  in  its 
administration  and  to  defects  in  administrative  machinery  that 
that  can  be  removed.  As  before  stated  a  score  of  states  have  had 
experience  with  this  form  of  tax  with  such  uniformly  poor  success 
that  it  had  become  axiomatic  in  discussions  of  fiscal  policy  that 
it  was  an  impossible  tax  for  the  states  to  administer.  Only  the 
long  arm  of  the  federal  government  could  be  relied  upon  to  reach 
reluctant  taxpayers.  In  1911  the  state  of  Wisconsin  after  long 
consideration  of  the  measure  passed  an  income  tax  law  that  has 
to  all  appearances  worked  successfully.  That  experience  en- 
courages the  confident  belief  that  other  states  may,  by  providing 
adequate  administrative  machinery  and  manning  it  with  the 
right  kind  of  officers,  also  adopt  this  highly  desirable  form  of  tax. 
We  present  herewith  the  main  features  of  the  Wisconsin  law. 

The  law  applies  to  all  residents  of  the  state  and  to  non- 
residents deriving  an  income  from,  sources  having  a  situs  within 
the  state.  The  general  rule  is  followed  in  determining  taxable 
income,  that  income  from  property  which  is  taxable  at  its  situs 
also  follows  the  situs  of  the  property,  and  income  derived  from 
property  taxable  at  the  domicile  of  the  owner  also  follows  the 
residence  of  the  recipient  of  the  income.  Thus  a  resident  is  not 
taxable  on  income  from  rents  or  royalties  arising  in  another 
state,  but  he  is  taxable  on  that  derived  from  securities  regardless 
of  their  origin;  while  rents  and  royalties  arising  in  Wisconsin  are 
taxable  to  non-residents. 

Exemptions  and  Deductions. — In  the  case  of  single  per- 
sons an  exemption  of  $800  is  allowed;  in  case  of  husband  and  wife 
$1,200  is  exempt;  and  for  each  child  under  eighteen  years  of  age 
and  other  dependent  persons,  an  additional  exemption  of  $200 
is  allowed.  Individuals  are  allowed  deductions  from  their  gross 
incomes,  such  as  necessary  expenses  paid,  losses  and  deprecia- 
tion, interest  on  indebtedness,  pensions  received  from  the  United 
States,  certain  taxes,  inheritances  in  case  a  tax  thereon  has  been 
paid  to  the  state,  and  life  insurance  up  to  $10,000. 

Corporations  are  not  allowed  any  exemption,  but  their  net 
income  is  determined  in  much  the  same  way  as  that  of  individuals. 
It  should  be  said  by  the  way  that  the  railroads  and  other  public 
service  corporations  and  the  insurance  companies  do  not  come 
under  the  income  tax  law. 


Rates  173 

Rates. — The  rates  are  progressive.  For  individuals  they 
begin  at  1  per  cent  on  the  first  $1,000  of  taxable  income  and 
gradually  increase  on  each  $1,000  up  to  and  including  the  13th 
which  taxes  a  6  per  cent  rate  and  the  same  rate  applies  to  addi- 
tional income. 

The  rate  for  the  corporations  starts  at  2  per  cent  and  rises 
by  more  abrupt  grades  to  6  per  cent  on  the  7th  thousand  of 
taxable  income.  The  original  law  had  a  complicated  system  of 
rates  based  on  the  dividends  paid,  a  plan  that  no  doubt  has 
theoretical  justification,  but,  because  of  practical  difficulties,  was 
given  up  in  1913  for  the  simple  scale  described  above. 

Administration  of  the  Law. — No  part  of  the  law  was 
worked  out  with  more  painstaking  care  than  the  administrative 
provisions.  It  was  at  this  point  that  other  states  had  failed  in 
such  legislation  and  it  was  fully  realized  that  failure  would  come 
to  the  Wisconsin  law  unless  it  should  provide  carefully  designed 
machinery  for  its  enforcement.  The  state  was  fortunate  in  having 
an  efficient  commission  with  strong  powers,  some  of  the  members 
of  which  had  served  continuously  since  its  organization  in  1901. 
To  this  commission,  and  not  to  local  authorities,  was  entrusted  the 
enforcement  of  the  law.  The  sixty-nine  counties  of  the  state  are 
divided  into  forty-one  districts  and  an  income  tax  assessor  is 
appointed  for  each  district  by  the  tax  commission  for  a  term  of 
three  years.  These  assessors  must  be  residents  of  the  state  but 
not  necessarily  of  the  district  where  they  serve,  and  they  may  be 
transferred  or  removed  by  the  commission.  The  income  tax 
assessors  assess  individuals,  the  commission  the  corporations. 
An  appeal  lies  from  the  assessors  to  a  Board  of  Review  composed 
of  three  members  appointed  by  the  tax  commission  in  each  county, 
and  from  that  body  to  the  tax  commission.  Adequate  penalties 
are  provided  for  neglect  to  make  returns  and  for  making  false 
returns,  both  for  individuals  and  corporations.  The  old  office  of 
county  supervisor  of  assessment  is  abolished  and  the  duties  of 
that  office  devolve  upon  the  appointive  income  tax  assessors. 

Personal  Property  Practically  Exempted. — The  law 
specifically  exempts  certain  kinds  of  property  formerly  taxed. 
Intangibles  are  exempt,  farm  and  garden  tools  and  machinery, 
household  goods  including  musical  instruments,  and  personal 
ornaments.  Live  stock,  merchants  and  manufacturers'  goods  and 
wares  still  remain  subject  to  taxation;  but  it  is  provided  that  any 


174  Report  of  Nebraska  Tax  Commission 

person  who  has  paid  a  tax  assessed  on  his  personal  property  may 
offset  such  tax  against  his  income  tax  if  one  is  charged  against 
him.  Thus  one  pays  a  tax  on  his  personal  property  only  in  case 
he  is  not  an  income  taxpayer. 

Operation  of  the  Law. — The  details  of  the  operation  of 
this  law  are  not  yet  published  except  for  the  first  year.  The 
results  for  the  first  year  were  better  than  had  been  predicted. 
The  yield  was  larger  than  had  been  expected.  The  total  income 
tax  charged  was  $3,500,000.  But  offsets  allowed  for  personal 
property  taxes  paid  and  for  other  reasons  were  expected  to 
amount  to  35  or  40  per  cent  of  this  amount  leaving  about  $2,200,- 
000  as  the  revenue  from  the  income  tax.  This  is  more  than  double 
the  tax  secured  in  1911  from  the  personal  property  exempted 
under  the  new  law.  The  tax  charged  in  1913  was  $4,091,000  from 
which  offsets  will  be  allowed  as  indicated  above.  We  have  no 
data  as  to  actual  collections  but  it  is  understood  that  some  large 
amounts  have  been  withheld  pending  litigation.  -There  can, 
however,  be  no  doubt  of  the  success  of  the  law  from  the  point  of 
view  of  securing  a  revenue. 

The  law  has  proven  essentially  an  urban  tax.  In  the  first 
year  over  40  per  cent  of  the  entire  tax  was  charged  in  Milwaukee 
county  and  more  than  80  per  cent  in  the  seventeen  counties 
having  the  larger  cities  of  the  state,  while  20  per  cent  was  charged 
in  the  remaining  54  counties  containing  about  50  per  cent  of  the 
population.  The  urban  character  of  the  tax  is  shown  in  another 
way  by  the  returns  from  Dane  county  in  which  the  capital  is 
located.  In  the  county  there  are  six  times  as  many  farmers  as 
there  are  public  employees  "yet  only  sixty-eight  farmers  in  Dane 
county  as  contrasted  with  six  hundred  twenty-four  public  em- 
ployees and  professors  will  pay  an  income  tax;  and  the  farmers 
will  pay  an  income  tax  of  $877.35,  while  the  public  officials,  pro- 
fessors and  teachers  will  pay  $7,224.44,  more  than  eight  times 
as  much/' 

The  tax  seems  to  have  reached  the  corporations  effectively. 
The  relative  assessment  of  corporations  is  shown  in  the  following 
table: 

1912  1913 

Tax  charged  against  corporation $2,392,454    $2,793,605 

Tax  charged  against  individuals  and  firms .   1,108,707      1,297,484 


$3,501,161    $4,091,089 


Distribution  of  the  Tax  175 

The  average  rate  levied  on  corporations  was  5.4  per  cent;  the 
average  for  individuals  and  firms  was  slightly  less  than  2  per  cent. 
It  is  notable  that  out  of  the  2,333,000  population  of  the  state 
only  46,582  were  assessed  and  a  considerable  number  of  these  doubt- 
less offset  the  whole  of  their  income  tax  with  personal  property  tax 
receipts.  In  Milwaukee  county  forty  persons  in  the  one  thousand 
were  assessed;  in  Dane  county  thirty-six;  while  in  more  than 
half  a  dozen  less  than  five  persons  per  thousand  of  population  were 
assessed.  The  average  for  the  state  in  1912  was  19.96  per  thous- 
and of  the  population;  that  is,  slightly  less  than  2  per  cent  of  the 
population  got  upon  the  personal  income  tax  list. 

Distribution  of  the  Tax. — The  state  retains  10  per  cent 
of  the  proceeds  of  the  tax,  20  per  cent  goes  to  the  county,  and  70 
per  cent  to  the  local  district  in  which  collected.  Of  the  estimated 
net  yield  of  $2,200,000  for  1912: 

The  share  of  the  state  would  be $220,000 

The  share  of  the  counties  would  be 440,000 

The  share  of  the  towns,  cities  and  villages .  . .   1,540,000 


$2,200,000 

Is  the  Income  Tax  Inquisitorial? — This  question  is 
frankly  discussed  by  the  Wisconsin  Commission's  Report  for 
1912.  It  says: 

"No  tax  measured  by  ability  to  pay  can  be  administered 
without  asking  searching  questions.  The  more  thoroughly  these 
questions  are  asked  the  more  certain  honest  people  can  be  that 
the  tax  dodgers  are  paying  their  fair  share.  If  taxation  is  con- 
fined to  visible  things  alone,  the  assessor  can  get  along  without 
asking  questions;  but  such  procedure  would  exempt  from  taxa- 
tion many  of  the  wealthiest  and  ablest  members  of  the  com- 
munity. When  an  assessor  is  trying  to  ascertain  a  man's  income 
or  the  value  of  his  personal  property,  he  must  ask  either  the  man 
himself  or  the  man's  neighbors.  The  second  method  is  obnoxious. 
The  open  way  is  to  put  the  taxpayer  himself  on  record.  This 
procedure  is  the  honest  man's  only  protection  against  the  tax 
dodger. 

The  old  personal  property  tax  would  have  been  much  more 
inquisitorial  than  the  income  tax  if  it  had  been  enforced.  It 
failed  largely  because  questions  were  not  asked;  and  its  failure 
resulted  in  great  financial  burdens  being  shifted  from  the  shoulders 
of  certain  classes  of  the  community  onto  the  shoulders  of  other 
classes  far  less  able  to  bear  them.  The  income  tax  will  be  a  farce  if 
searching  questions  are  not  asked  and  answers  insisted  upon." 


176  Report  of  Nebraska  Tax  Commission 

Another  objection  to  an  income  tax  has  always  been  that  it 
requires  taxpayers  to  reveal  information  hurtful  to  their  business 
interests.  This  objection  is  held  to  be  unfounded.  Nothing  is 
revealed  by  the  records  not  already  known  to  the  credit  agencies 
and  to  the  business  world.  "A  man's  taxable  income  and  the 
tax  thereon  are  matters  of  public  record,  but  that  is  all.  Nothing 
is  known  of  his  exemptions,  or  his  untaxable  income,  or  of  his 
income  derived  from  business  transacted  without  the  state,  or 
of  his  income  derived  from  stocks  and  bonds  taxed  directly  to  the 
corporations  from  which  received." 

Does  the  Federal  Law  Preclude  a  State  Tax  on  Income? 

—It  has  been  held  by  some  citizens  appearing  before  the  Com- 
mission that  since  Congress  has  now  entered  the  field  of  income 
taxation,  the  staces  will  be  precluded  from  entering  it.  We  do 
not  think  so.  It  has  been  a  mooted  question  whether  the  states 
or  the  federal  government  have  greater  natural  advantages  in  the 
administration  of  such  a  law.  Under  equally  efficient  admin- 
istration the  advantages  probably  lie  with  the  states,  and  there  is 
no  reason  why  the  state  should  not  have  as  good  machinery  and 
as  efficient  officers  as  the  federal  government  if  they  want  them. 
The  high  exemption  now  allowed  under  the  federal  law,  $3,000  or 
$4,000  according  to  marital  condition,  leaves  room  in  an  agricul- 
tural state  like  Nebraska  for  the  operation  of  an  income  tax. 

Information  is  not  available  as  to  the  number  of  income  tax- 
payers in  the  state  under  the  federal  law.  But  the  Preliminary 
Report  of  the  Commissioner  of  Internal  Revenue  for  the  fiscal 
year  ending  July  30,  1914,  shows  that  for  the  ten  months  for 
which  the  federal  tax  was  charged  the  corporations  of  Nebraska 
paid  $168,084.27  and  individuals  paid  $76,857.75,  a  total  of 
$244,942.02.  This  is  the  equivalent  of  an  annual  tax  of  $293,930.- 
40.  Some  indication  of  what  could  be  expected  from  a  state  in- 
come tax  can  be  gained  by  comparing  the  federal  tax  collected 
in  Wisconsin  and  the  state  income  tax.  The  receipts  of  the 
federal  tax  reduced  to  an  annual  basis  were  $862,114  as  against 
$3,501,000  assessed  in  1912  under  the  state  law,  and  $2,200,000 
estimated  net  yield,  after  deduction  of  personal  property  taxes, 
etc.  If  the  same  relations  between  the  federal  and  state  yield  as 
here  indicated  should  prevail  in  Nebraska  a  revenue  of  something 
like  a  million  dollars  could  be  counted  upon.  It  must  be  borne 


Conclusions  and  Recommendations  177 

in  mind,  however,  that  the  federal  figures  show  actual  receipts, 
and  the  Wisconsin  figures  show  only  the  tax  assessed. 

Conclusions  and  Recommendations. — While  believing 
thoroughly  in  the  principles  of  the  income  tax  and  that  such  a 
tax  should  in  time  be  made  a  part  of  the  revenue  system  of  Ne- 
braska, this  Commission  recommends  that  no  law  for  taxing  in- 
comes be  enacted  by  the  legislature  of  1915.  While  the  law  in 
Wisconsin  has  proven  a  notable  success,  many  obstacles  have  had 
to  be  met  and  they  are  by  no  means  all  overcome.  The  first 
year's  experience  led  to  many  important  amendments  in  1913 
and  others  will  doubtless  be  found  necessary  by  the  next  legisla- 
ture. The  success  that  has  been  attained  in  that  state  has  been 
due  to  the  highly  efficient  administration  of  the  law.  ,  This 
efficiency  could  not  have  been  secured  but  for  the  centralized  ad- 
ministration provided  by  law.  A  similar  law  could  of  course  be 
readily  enacted  in  Nebraska  and  probably  must  be  before  a  suc- 
cess can  be  attained  in  taxing  incomes;  but  the  passing  of  a  law  is 
not  enough.  The  chief  factor  in  the  success  of  Wisconsin  has 
been  the  way  in  which  the  taxing  machinery  has  been  manned. 
The  commission  itself  has  been  in  existence  for  fourteen  years 
and  has  long  had  the  confidence  of  the  people  of  the  state  so  that 
the  large  powers  of  appointment  and  supervision  asked  for  in 
1911  could  be  granted  in  the  confident  belief  that  they  would  be 
used  only  in  the  public  interest.  The  commission  which  was  to 
be  charged  with  the  administration  of  the  law  gave  several  years 
to  the  study  of  every  detail  of  the  statute  which  it  was  to  ad- 
minister. 

In  our  opinion  it  would  be  unwise  for  Nebraska  to  undertake 
so  delicate  a  task  as  that  of  administering  an  income  tax  law 
without  going  through  some  such  period  of  preparation  for  it 
as  Wisconsin  has  gone  through.  If  it  is  not  understood  from  tVe 
beginning  that  it  will  be  fairly  and  fully  administered  by  capable 
officials,  an  income  tax  would  become  as  lamentable  a  failure  as 
the  taxation  of  intangible  property  it  is  intended  to  supersede. 
Until  the  state  has  built  up  an  efficient  central  control  through 
a  permanent  commission  and  that  commission  by  its  integrity 
and  its  efficiency  has  established  itself  in  the  confidence  of  the 
people,  action  looking  to  an  income  tax  ought  to  be  deferred. 


178  Report  of  Nebraska  Tax  Commission 


CHAPTER  X 

THE  INHERITANCE  TAX  LAW 

In  January,  1897,  Governor  Silas  A.  Holcomb  recommended 
in  his  message  to  the  legislature  the  passage  of  an  inheritance  tax 
law,  but  it  was  not  until  1901  that  the  law  was  finally  enacted. 
It  has  become  an  established  feature  of  our  revenue  system. 
This  law  was  adopted  and  worked  over  from  the  Illinois  law, 
which  at  that  time  had  the  advantage  of  having  been  construed  and 
upheld  not  only  by  the  Supreme  Court  of  Illinois,  but  also  by  the 
Supreme  Court  of  the  United  States  (170  U.  S.  283).    Our  law 
has  always  been  regarded  as  founded  upon  a  solid  constitutional 
basis  for  the  reason  that  prior  to  its  enactment  the  Supreme 
Court  of  the  United  States  had  upheld  the  Illinois  law  as  con- 
stitutional legislation,  had  established  the  right  of  classification 
and  gradation  and  had  placed  the  matter  beyond  argument  as 
to  it  being  an  invasion  of  property  rights  by  holding  that  an  in- 
heritance tax  is  a  tax  upon  the  right  of  succession  and  not  upon 
property  itself.    It  must  be  conceded  that  inheritance  taxes  have 
come  to  stay  so  far  as  the  great  majority  of  states  of  the  Union 
are  concerned.     Ross  on  "Inheritance  Taxation/'  1912  edition, 
cites  complete  statutes  in  thirty-nine  of  the  states  providing  for 
taxes  upon  inheritances  and  it  is  not  known  that  any  state  has 
repealed  an  inheritance  tax  law,  except  the  state  of  Kansas, 
where  by  an  oversight  the  law  was  repealed.     There  is  ample 
assurance,  however,  that  it  will  be  reenacted  in  that  state  by  the 
next  legislature.     It  must  therefore  be  conceded  that  the  prin- 
ciple of  the  inheritance  tax  is  now  recognized  by  nearly  all  states 
of  the  Union  as  a  valid  exercise  of  the  taxing  power  upon  transmis- 
sion of  property  under  and  by  virtue  of  the  law  itself  from  the 
dead  to  the  living;  for  the  general  rule  is  that  inheritance  tax  is 
not  levied  upon  the  property,  but  upon  the  succession  and  that 
the  value  of  the  property  is  merely  used  to  determine  the  amount 
of  the  levy  and  that  those  receiving  the  property  under  and  by 
virtue  of  the  laws  of  succession  in  any  state,  should  and  ought  to 
pay  a  tax  upon  the  right  or  privilege  conferred  by  law.  The  expense 
of  maintaining  the  state,  enforcing  the  law,  protecting  the  property 


The  Inheritance  Tax  Law  179 

and  providing  machinery  for  the  administration  of  estates, 
should  be  paid  in  part  by  those  who  become  beneficiaries  of  the 
decedent  under  the  decedent  laws.  No  considerable  opposition 
is  found  at  this  date  to  the  inheritance  tax  and  the  public  is  cheer- 
fully acquiescing  in  the  operation  of  this  law  wherever  it  is 
adopted  in  terms  that  are  fair  and  specific,  and  when  it  becomes 
better  understood,  all  opposition  will  disappear.  Of  course  there 
are  details  to  be  considered,  such  for  instance,  as  the  exemption 
of  the  widow's  estate  or  dower,  the  exemption  of  gifts  made  for 
charitable  purposes,  an  exemption  of  a  certain  amount  to  direct 
lineal  descendants,  the  levying  of  higher  rates  on  collateral  rela- 
tives or  strangers  than  those  imposed  upon  lineal  descendants, 
and  the  graduation  of  the  tax  according  to  the  value  of  the  estate. 
But  all  of  these  matters  have  been  covered  quite  satisfactorily 
by  our  statute  in  the  state  of  Nebraska,  and  but  few  amendments 
have  been  made  to  the  law  since  its  adoption  in  1901. 

These  amendments  relate  principally  to  refunding  the 
tax  where  debts  are  proved  against  the  estate  after  the  inheritance 
tax  has  been  collected  and  for  refunding  taxes  erroneously  paid. 
In  1907  an  amendment  was  made  concerning  the  manner  of  ap- 
praisement, and  also  to  the  application  and  use  of  the  money 
derived  from  inheritance  taxes.  As  our  law  now  stands,  Section 
19  of  the  Act  provides:  That  all  money  collected  from  this  tax 
shall  be  expended  for  the  permanent  improvement  of  the  county 
roads  and  these  roads  must  begin  at  the  limit  of  a  city  or  village 
and  extend  therefrom  in  directions  most  traveled  by  the  public. 
Such  roads  shall  be  built  by  contract,  under  competitive  bidding 
and  it  will  be  observed  that  the  fund  can  therefore  not  be  used 
for  any  road  building  within  the  corporate  limits  of  any  city  or 
village.  It  would  seem  that  this  of  itself  was  a  discrimination 
against  cities,  towns  and  villages. 

This  is  founded  on  the  fact  that  many  estates  required  to 
pay  the  inheritance  tax  have  large  amounts  of  property  in  cities, 
towns  and  villages  and  yet  under  the  present  system,  the  tax  is 
applied  wholly  outside  such  sub-divisions.  It  also  is  plain  from 
the  table  hereto  appended  of  the  collection  of  inheritance  taxes, 
that  the  amount  derived  from  the  tax  is  uncertain  and  that  it 
fluctuates  so  much  from  year  to  year  as  to  make  it  a  source  of 
revenue  not  to  be  depended  upon  for  any  specific  amount  or 
purpose.  Added  to  the  state  revenue  each  year,  it  would  con- 


180  Report  of  Nebraska  Tax  Commission 

stitute  a  fairly  regular  amount  large  enough  to  be  worthy  of 
attention.  We  would,  therefore,  recommend  a  change  in  the  law 
so  that  inheritance  taxes  shall  be  paid  into  the  state  treasury  to 
become  a  portion  of  the  general  revenues  of  the  state.  This  of 
course  may  be  considered  a  move  toward  segregation  of  state 
revenues  on  specific  lines,  but  it  is  plain  that  corporation  occupa- 
tion taxes  do  more  good,  paid  directly  to  the  state,  than  they 
would  if  scattered  about  the  counties  of  the  state,  and  we  may  well 
consider  the  advisability  of  putting,  such  irregular  amounts  de- 
rived therefrom,  into  one  great  common  fund  in  the  state  treasury. 
So  too,  occupation  taxes  on  certain  lines  of  business  could  well  be 
added  to  the  state  revenues. 

In  view  of  the  legislation  adopted  by  many  states  in  recent 
years,  it  would  also  be  wise  to  reduce  the  amount  of  exemption 
allowed  under  the  present  law  and  thus  increase  the  revenues 
obtainable  from  this  tax.  We  recommend  that  Section  1  of  the 
Inheritance  Tax  Law  be  so  amended  as  to  allow  an  exemption  of 
$5,000  only  to  the  widow,  surviving  husband, .  child,  brother, 
sister,  father,  mother,  widow  of  the  son  or  husband  of  the  daugh- 
ter, and  that  the  exemption  in  favor  of  relatives  of  more  remote 
degree  should  be  correspondingly  reduced,  as  for  instance:  So 
that  not  more  than  $1,000  exemption  should  be  allowed  to  those 
taking  under  the  second  class  of  beneficiaries  and  no  exemption  at 
all  in  the  case  of  those  coming  under  the  third  class. 

The  courts  hold  that  the  legal  estate  created  by  statute  in 
favor  of  the  widow  is  not  subject  to  the  inheritance  tax,  therefore 
a  reduction  of  the  exemption  to  $5,000  to  each  person  is  a  sufficient 
exemption  for  even  the  widow  of  a  decedent  and  a  clear  exemp- 
tion of  $5,000  to  each  person  seems  to  be  a  sufficient  protection 
against  want  or  poverty,  while  the  inheritance  of  that  sum  of 
money  or  property  is  likewise  a  sufficient  guarantee  of  the  ability 
of  the  donee  or  devisee  to  pay  a  reasonable  tax  thereon.  It  is  not 
believed  that  in  an  agricultural  state  like  Nebraska,  on  our 
present  level  of  values  and  prices,  that  this  reduction  in  exemp- 
tions would  work  any  particular  hardship. 


The  Inheritance  Tax  Law  181 

In  the  second  class  we  suggest  and  recommend  the  following 
table  of  rates: 

Exemption,  $1,000 

2%  on  excess  of  $1,000  up  to  $4,000 
3%  "  "  "  $4,000  "  "  $7,000 
4%  "  "  "  $7,000  "  "  $10,000 
5%  "  "  "  $10,000  "  "  $15,000 
6%  "  "  "  $15,000  "  "  $30,000 
7%  "  "  "  $30,000  "  "  $50,000 
8'%  on  all  excess  above  $50,000 

Third  division  or  classification: 

Amount  of  exemption,  none. 
2%  on  all  sums  up  to  $3,000 

3%  on  excess  of     $3,000  up  to  $5,000 

3%    "       "      "     $5,000  "     "  $7,000 

5%    "       "      "     $7,000  "     "  $10,000 

6%    "       "      "   $10,000  "     "  $15,000 

7%    "       "      "   $15,000  "     "  $20,000 

8%    "       "     "  $20,000  "    "  $30,000 

9%    "       "     "   $30,000  "    "  $40,000 

10%    "       "     "  $40,000  "    "  $50,000 

and  all  sums  in  excess  thereof. 

We  would  recommend  that  the  administrative  machinery  of 
the  Inheritance  Tax  Law  be  strengthened  so  as  to  secure  more 
accurate  appraisals  and  to  the  end  that  no  estate  subject  to  the 
inheritance  tax  law  would  escape  payment  thereof,  which  seems 
to  be  quite  easily  accomplished  at  the  present  time,  particularly 
if  the  amount  and  value  of  the  estate  is  close  to  the  line  of  demarca- 
tion. Many  states  are  strengthening  the  administrative  sections 
of  their  laws  and  obtaining  large  revenues  thereby.  California 
seems  to  have  made  great  strides  in  that  direction  by  cent 
legislation  and  it  is  believed  that  much  could  be  accomplished 
in  this  state  along  that  line. 

It  is  respectfully  urged  that  the  present  statute  concerning 
inheritance  taxes  be  retained  as  far  as  possible  and  that  changes 
be  made  thereto  by  way  of  amendment  rather  than  by  an  entire 
new  statute,  on  account  of  the  value  of  the  numerous  court 
decisions  upholding,  construing  and  defining  the  present  law.  It 


182  Report  of  Nebraska  Tax  Commission 

would  be  a  distinct  loss  to  the  state  if  an  entirely  new  act  were  to 
be  drafted  and  enacted  and  a  constitutional  question  should  after- 
ward invalidate  it.  The  present  law  has  been  held  constitutional 
(74  Neb.,  675)  and  has  been  pretty  thoroughly  construed  and 
defined  by  several  decisions  subsequent  to  the  case  above  cited. 
It  also  has  the  added  fortification  of  the  decision  of  the  Supreme 
Court  of  the  United  States  upholding  the  Illinois  law,  from 
which  our  statute  is  taken.  Therefore  caution  should  be  observed 
in  making  any  changes  that  may  be  proposed  to  this  statute. 
The  Illinois  law  has  since  been  amended  in  some  particulars,  but 
is  still  much  like  ours,  except  that  it  allows  a  much  larger  exemp- 
tion to  the  widow,  children,  etc.,  and  also  that  the  tax  is  paid 
to  the  state  treasurer,  the  county  merely  retaining  2  per  cent 
allowed  to  the  treasurer  for  his  services  in  collecting  and  remitting 
the  same,  in  addition  to  his  salary  or  fees  allowed  him  by  law. 

The  financial  results  of  the  inheritance  tax  law  since  1905  are 
shown  in  the  table  printed  below.  Prior  to  that  year  the  tax  was 
collected  by  the  counties  and  covered  into  the  state  treasury. 
In  the  first  year  one  county  collected  $64,74,  in  the  biennium 
ending  November  30, 1904,  seventeen  counties  collected  $5,608.86. 
In  1905  the  act  was  amended  by  providing  for  the  use  of  the  tax 
for  local  purposes  as  described  above.  Down  to  this  time  $4,240.48 
in  addition  to  the  sums  noted  above  was  collected,  making  a  total 
of  $9,914.08  from  1901  to  1905.  This  sum  was  returned  to  the 
counties  for  local  use.  The  receipts  by  counties  since  1905  as 
reported  to  the  Legislative  Reference  Bureau  have  been  as  shown 
in  the  table  at  the  end  of  this  chapter.  We  also  subjoin  a  table 
showing  the  chief  provisions  of  the  inheritance  tax  laws  of  the 
several  states,  taken  from  State  and  Local  Taxation,  Volume  VI. 

Summary. — The  Act  of  1901  was  based  on  sound  prin- 
ciples, but  in  the  light  of  fourteen  years  of  experience  it  needs 
amendment  in  important  respects.  We  recommend  that  the 
exemption  be  reduced  as  indicated  above,  that  the  rates  as  in- 
dicated in  classes  two  and  three  be  increased  and  made  pro- 
gressive according  to  the  scale  given;  and  for  administrative 
reason,  sand  because  the  tax  from  its  nature  belongs  to  the  state 
rather  than  the  local  governments,  that  the  proceeds  thereof  be 
paid  into  the  general  fund  of  the  state  treasury. 


Financial  Results  Nebraska  Inheritance  Tax 


183 


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188  Report  of  Nebraska  Tax  Commission 


CHAPTER  XI 

AN  OCCUPATION  TAX  ON  MANUFACTURERS  AND 
DEALERS  IN  LIQUORS  AND  TOBACCOS 

One  of  the  possibilities  under  the  existing  conditions  of  our 
state  revenues  would  be  an  occupation  tax  imposed  upon  such 
occupations  and  businesses  as  would  distribute  a  light  and  in- 
direct tax  upon  the  purchasers  and  consumers  of  non-necessaries, 
such  as  intoxicating  liquors,  tobaccos,  cigars  and  all  forms  of  such 
products. 

This  sort  of  occupation  tax  which  is  closely  akin  in  its  nature 
to  a  license,  is  usually  paid  promptly  and  cheerfully  by  the 
brewer,  distiller  and  retail  seller,  and  it  falls  in  small  amounts 
upon  those  who  consume  something  which  they  may  readily  dis- 
pense with  if  they  do  not  choose  to  consume  the  article  specially 
taxed. 

A  reasonable  occupation  tax  upon  distillers,  brewers,  rec- 
tifiers and  retail  dealers  would  bring  in  a  considerable  revenue 
to  the  state  and  it  would  appear  just  from  any  standpoint  of 
economics  to  lay  a  heavier  burden  upon  these  lines  of  business 
since  the  direct  result  of  such  business  and  traffic  creates  a  heavy 
inroad  on  state  revenues. 

The  Commission  is  informed  that  there  are  at  this  time  ap- 
proximately 2,272  federal  retail  liquor  dealers'  permits  held  by 
Nebraska  dealers.  There  are  also  licenses  held  by  brewers,  dis- 
tillers and  rectifiers  of  liquors  and  a  vast  army  of  dealers  in  to- 
bacco and  cigars,  all  of  whom  should  be  required  to  contribute 
in  some  special  way  to  the  state  for  engaging  in  this  particular 
line  of  business. 

The  consumption  of  alcoholic  liquors,  according  to  the  Report 
of  the  Committee  of  Fifty,  1899,  is  the  principal  cause  of  25  per 
cent  of  poverty,  37  per  cent  of  pauperism,  45.8  per  cent  of  child 
destitution  and  abandonment  and  50  per  cent  of  all  crimes.  All 
of  these  require  expenditures  by  the  state,  as  well  as  the  county 
and  municipality,  for  poverty,  crime  and  child  destitution  and 
abandonment  reach  out  and  claim  the  interest  of  the  state  as 
well  as  that  of  the  locality.  The  consumption  of  alcoholic  liquors, 


Manufacturers  and  Dealers' Occupation  Tax  189 

according  to  the  report  of  Dr.  Rosanoff  of  Clark  University,  1909, 
causes  25  per  cent  of  all  insanity  and  at  that  date  there  were, 
according  to  his  figures,  43,605  insane  persons  in  the  United 
States  whose  insanity  was  directly  chargeable  to  alcoholic  liquors. 
By  the  United  States  Government  report  pertaining  to  divorces, 
1908,  it  is  shown  that  19.5  per  cent  of  divorces  are  caused  by  the 
use  of  alcoholic  liquors,  and  this  is  exclusive  of  decrees  that  were 
granted  to  wives  for  cruelty  and  non-support. 

With  the  above  staggering  indictment  against  the  liquor 
business,  we  should  not  hesitate  to  say  that  the  expense  imposed 
on  the  state  by  this  traffic  is  so  enormous  that  these  businesses, 
from  the  brewery  and  distillery  down  to  the  saloon  and  pharmacy, 
are  not  paying  a  fair  proportion  of  taxes  when  measured  against 
the  other  lines  of  industry  in  manufacturing  and  other  retail  sales 
trades. 

While  the  way  is  clear  to  tax  occupations  under  the  present 
constitution,  still  the  adoption  of  the  Norton  Amendment  will 
specifically  provide  for  the  taxing  of  privileges  and  occupations, 
and  so  long  as  Nebraska  is  a  local  option  state  where  one  com- 
munity can  vote  in  the  saloon  while  another  votes  it  out,  we  see  no 
reason  why  a  revenue  should  not  be  exacted  for  state  purposes 
that  will  in  some  measure  assist  the  state  in  caring  for  the  insane, 
the  criminal,  the  destitute  and  the  delinquent,  who  are  made 
such  by  reason  of  the  liquor  traffic.  We  therefore  recommend 
an  occupation  tax  upon  the  following  proposed  schedule,  on  these 
lines  of  business: 

Brewers,  distillers  and  rectifiers  $1,000  each  per  annum. 
Wholesale  liquor  dealers,  $500  per  annum. 
Retail  liquor  dealers,  $100  per  annum. 

Drug  stores  and  pharmacies  having  permits  to  sell  intoxicat- 
ing liquors  $50.00  per  annum. 

Manufacturers  of  cigars  and  tobaccos,  $100  per  annum. 
Wholesale  dealers  in  cigars  and  tobaccos,  $50.00  per  annum. 
Retail  dealers  in  cigars  and  tobaccos,  $25.00  per  annum. 

In  connection  with  the  above  schedule,  we  would  suggest  that 
the  law  be  so  framed  as  to  imply  nothing  suggestive  of  a  license  or 
permit  to  transact  such  business,  from  the  state,  but  that  it  be 
framed  upon  the  theory  that  anyone  engaging  in  such  business 
must,  after  securing  the  local  or  municipal  license  required,  pay 
to  the  state  an  occupation  tax  for  the  privilege  of  conducting 


190  Report  of  Nebraska  Tax  Commission 

this  business.  This  would  not  interfere  with  local  option  in  the 
least.  Every  municipality,  city  and  village  would  still  determine 
its  own  policy  as  to  whether  or  not  it  desired  to  be  "wet  or  dry," 
but  if  a  certain  town  having  voted  "wet,"  granted  license  to  a 
liquor  dealer,  then  it  would  be  necessary  for  the  dealer  to  pay 
the  occupation  tax  or  be  subject  to  a  heavy  penalty  to  be  stipu- 
lated in  the  law. 

It  is  the  belief  of  the  Commission  that  this  tax  would  be 
paid  with  almost  no  expense  or  effort  on  the  part  of  the  state,  as 
all  dealers  engaging  in  these  lines  of  business  would  be  likely  to 
admit  the  justness  of  a  revenue  accuring  to  the  state,  as  well  as  to 
the  village,  town,  city  and  school  district. 


Taxation  of  Grain  Dealers  191 


CHAPTER  XII. 

THE  TAXATION  OF  GRAIN  DEALERS 

The  Present  Method. — Prior  to  1904  grain  dealers  were 
taxed  as  other  merchants  were  upon  the  basis  of  the  value  of 
the  property  in  their  possession  on  the  first  of  April.  Because  of 
the  frequency  with  which  elevator  companies,  sometimes  doing  a 
large  business,  returned  for  assessment  only  the  value  of  the 
elevator  and  equipment  led  the  legislature  in  1903  to  inaugurate 
a  new  method  of  assessing  dealers  in  grain.  The  plan  was  adopted 
of  assessing  them  on  the  basis  of  the  "average  amount  of  capital 
invested  in  such  business  for  the  preceding  year."  No  rule  was 
laid  down  for  finding  the  "average  capital,"  nor  was  it  clear  just 
what  was  to  be  included  in  the  term. 

In  1906  a  case  came  up  to  the  supreme  court  from  Lancaster 
County  involving  the  meaning  of  the  term.  The  county  assessor 
had  added  $10,000  to  the  schedule  of  a  company  on  account  of 
grain  found  on  hand  on  assessment  day.  The  company  had 
contended  that  the  grain  on  hand  should  not  be  included  in  the 
assessment  of  its  tangible  property  since  it  was  included  "in  the 
"average  capital"  separately  returned.  The  supreme  court  in 
its  first  decision  took  this  view  of  the  matter,  holding  that  the 
purpose  of  the  legislature  was  to  distinguish  between  the  capital 
which  could  easily  be  viewed  by  the  assessor  and  that  not  easy 
to  determine;  that  the  distinction  was  clear,  therefore,  between 
the  capital  invested  in  the  plant  on  the  one  hand  and  the  working 
capital  used  in  buying  and  selling  on  the  other;  and  that  the 
average  amount  of  this  working  capital  was  what  the  assessor 
was  required  to  find.  Central  Granaries  Co.  v.  Lancaster  county, 
77  Neb.,  311.  On  rehearing,  a  second  decision  was  filed  vacating 
the  first,  and  confirming  the  decision  of  the  district  court  which 
had  upheld  the  county  assessor  in  treating  grain  on  hand  as 
"tangible  property"  within  the  meaning  of  the  section  which 
required  that  "real  estate  and  other  tangible  property  shall  be 
assessed  separately"  from  the  "average  capital  invested  in  the 
business  for  the  preceding  year."  That  is,  all  tangible  property 
is  to  be  treated  as  such  in  the  ordinary  meaning  of  the  term, 


192  Report  of  Nebraska  Tax  Commission 

and  to  this  is  to  be  added  any  excess  of  "average  capital"  found 
to  have  been  employed.  It  seems  that  this  rule  would  work  out 
about  as  follows:  If  the  assessor  finds  that  an  average  capital 
of  $5,000  has  been  employed  in  the  business  and  that  cash  and 
grain  worth  just  that  much  are  on  hand  on  April  1st,  the  capital 
is  just  accounted  for;  if  he  finds  $3,000  worth  of  grain  he  adds 
$2,000  to  make  up  the  average;  and  if  he  finds  $6,000  worth  of 
grain  he  then  ignores  the  average  capital  entering  the  $6,000 
worth  of  grain  as  tangible  property.  This  is  the  practical  inter- 
pretation of  the  law  as  left  by  the  decision  of  1907,  by  some 
assessors  at  least. 

To  make  a  difficult  section  worse  the  legislature  in  1909 
amended  it  by  inserting  the  declaration  that  "tangible  property" 
shall  not  apply  to  or  incude  grain  on  hand,  so  that  we  now 
have  this  remarkable  provision  for  the_  assessment  of  grain 
dealers,  that  they  shall  determine  the 

"average  amount  of  capital  invested  in  such  business  for  the  pre- 
ceding year,  and  taxes  shall  be  charged  upon  such  average  cap- 
ital the  same  as  on  other  property.  Real  estate  and  all  other 
tangible  property  shall  be  assessed  separately.  'Tangible  prop- 
erty' shall  not  apply  to  or  include  grain  on  hand.  'Average 
capital'  shall  include  all  grain  purchased  during  the  year  whether 
the  same  has  been  sold  or  is  still  on  hand  at  the  time  of  assessment.' ' 

To  complicate  matters  still  further  the  attorney  general,  with- 
out giving  a  formal  opinion,  later  publicly  expressed  the  opinion 
that  the  amendment  of  1909  has  no  force,  and  that  the  rule  laid 
down  in  1907  still  holds. 

Operation  of  the  Law. — This  section  has  caused  trouble 
out  of  all  proportion  to  its  fiscal  importance.  Under  the  item 
"capital  invested  by  grain  brokers"  only  from  $275,000  to 
$300,000  are  placed  on  the  assessment  rolls,  yet  there  is  hardly  a 
section  of  the  revenue  law  that  causes  more  friction  and  dis- 
satisfaction than  the  one  under  review.  The  practice  of  the 
assessors  varies  in  the  matter  of  including  grain  on  hand  in  the 
tangible  property;  and,  what  is  of  more  significance,  in  the 
method  of  determining  "average  capital"  employed.  The 
assessors  have  been  left  to  struggle  with  the  problem  and  they 
have  settled  it  in  different  ways.  Before  the  case  cited  above 
reached  the  supreme  court  a  plan  had  been  evolved  and  generally 
adopted,  of  dividing  the  volume  of  business  done  in  the  year 


Taxation  of  Grain  Dealers  193 

by  some  number  representing  the  supposed  frequency  of  turn- 
over. Thus  an  elevator  may  have  handled  20,000  bushels  of 
wheat  at  an  average  price  of  80  cents,  requiring  an  aggregate 
outlay  of  $16,000.  Assuming  that  in  doing  this  business  the 
funds  were  turned  ten  times,  an  "average  capital"  of  $1,600 
would  be  required  for  the  transaction . 

The  difficulty  with  this  method  lies  in  determining  the 
proper  "divisor".  If  for  example  in  the  above  case  it  is  assumed 
that  the  turn-over  is  twenty  times  a  year  the  "average  capital" 
required  would  be  but  $800.  The  problem  is,  not  to  find  the 
average  turn-over  for  all  elevators  but  for  a  given  elevator  in  a 
given  year.  Letters  from  a  large  number  of  assessors  show  that 
they  exercise  wide  discretion  in  the  use  of  a  divisor.  Some  do 
not  concern  themselves  with  finding  average  capital  at  all.  Those 
who  do,  report  the  use  of  12,  15,  20,  24,  30,  36  and  313  as  a  "divi- 
sor." The  assessor  using  the  last  number  got  $170,000  worth  of 
business  done  with  a  working  capital  of  $543.  An  accurate 
assessment  would  of  course  require  the  use  of  different  divisors 
according  to  the  business  methods  of  the  elevator  company.  One 
which  habitually  makes  frequent  shipments  will  do  a  given  volume 
of  business  with  a  smaller  fund  than  one  which  follows  a  contrary 
practice.  In  only  one  or  two  instances  do  we  find  that  the  assessor 
varies  the  divisor  for  different  companies  within  his  jurisdiction. 

The  practical  bearing  of  this  difference  in  methods  was 
brought  out  in  the  case  cited  above.  The  plaintiff  was  a  line 
company  operating  fifty  or  sixty  elevators.  Shipments  were  made 
from  these  to  central  stations  for  cleaning  and  mixing  the  grain. 
One  of  these  was  located  in  Lancaster  county.  It  was 
contended  by  the  company  that  the  assessor  had  no  right  to 
assess  the  grain  found  in  Lancaster  County  since  it  had  been 
bought  out  in  the  state  and  assessed  there  as  "average  capital". 
This  view  of  the  law  can  be  very  plausibly  defended.  But  even 
though  it  may  be  proven  to  be  good  law,  it  can  hardly  be  shown 
to  work  equitably.  A  line  company  which  keeps  the  bins  of  its 
country  elevators  clean  by  frequent  shipments  to  its  terminals 
will  of  course  employ  comparatively  little  working  capital  at  the 
country  elevator.  The  grain  bought,  is  soon  stored  at  the 
central  station  and  the  balance  usually  carried  by  such  companies 
in  the  local  bank  is  small.  In  fact  it  is  not  infrequently  the 
practice  for  the  bank  to  receive  their  checks  and  send  them 
7 


194  Report  of  Nebraska  Tax  Commission 

forward  to  the  central  office  for  payment.  With  such  a  method 
of  conducting  business,  the  law  may  be  fully  complied  with  and 
yet  a  small  cash  item,  or  small  "average  capital"  item,  be  truth- 
fully returned  as  far  as  the  local  business  is  concerned.  But 
unless  the  law  provfdes  some  means  of  reaching  the  capital 
employed  in  carrying  the  grain  at  the  terminals,  an  injustice  is 
done  those  competitors  who  pay  a  tax  on  their  "average  capital' ' 
on  the  basis  of  the  full  time  it  is  tied  up  in  grain.  To  illustrate: 
A  company  having  terminal  facilities  may,  in  the  natural  course 
of  business,  have  grain  in  its  local  elevator  ten  days  and  the  same 
grain  in  its  terminal  elevator  for  twenty  days.  It  is  not  equitable 
for  it  to  use  a  large  divisor — say  36 — on  the  ground  of  a  frequent 
turn-over  of  capital  and  thus  make  out  a  low  "average  capital' ', 
while  a  competitor,  carrying  his  grain  also  an  average  of  thirty 
days  is  compelled  to  use  a  small  divisor — say  12 — and  thus  make 
make  an  item  of  "average  capital"  three  times  that  of  the  line 
company  for  the  same  amount  of  grain  handled.  Theoretically 
the  line  company  ought  to  be  assessed  at  the  local  elevator  on 
the  basis  of  holding  its  grain  ten  days  and  at  the  terminal  on  the 
basis  of  holding  it  twenty  days  in  the  case  assumed.  This  would 
be  equitable  as  between  competitors,  but  to  make  such  a  compu- 
tation would  render  more  complex  and  difficult  a  method  already 
top-heavy  with  complexities  and  difficulties. 

Methods  in  Other  States. — In  most  states  grain  dealers 
are  taxed  as  they  were  in  Nebraska  prior  to  1903.  North  Dakota, 
however,  since  1907  has  had  a  low  bushel  tax  on  "all  grain  grown 
within  the  state  and  therein  in  elevators  and  granaries"  at  the 
rate  of  one-eighth  of  a  cent  for  oats,  barley,  corn,  speltz  and  rye, 
three-eighths  of  a  cent  for  wheat,  and  one-half  cent  for  flax.  These 
rates  it  should  be  noted  apply  to  grain  in  the  hands  of  producers 
and  dealers  alike  on  assessment  day.  Grain  grown  outside  the 
state  is  taxed  according  to  value.  We  do  not  know  what  consider- 
ations led  to  the  enactment  of  this  law,  but  its  effect  would  be  to 
discriminate  against  grain  grown  outside  the  state  by  whom-so- 
ever  held. 

Minnesota  in  1909  adopted  a  bushel  tax  of  another  kind. 
Graindealers  there  are  taxed  (1)  on  the  value  of  the  plant  at  the 
local  rate;  (2)  on  cash  and  credits  held  at  the  rate  of  3  mills  on 
the  dollar,  the  same  as  other  owners  of  such  property;  and  (3) 


Conclusions  and  Recommendations  195 

on  the  grain  "received  or  handled"  at  an  elevator  or  warehouse, 
regardless  of  place  of  growth,  at  the  rate  of  one-fourth  of  a  mill 
per  bushel  of  flax  and  wheat,  and  one-eighth  of  a  mill  per  bushel 
of  all  other  kinds  of  grain.  Grain  on  hand  on  assessment  day  is 
not  assessed  to  the  dealer.  The  merit  of  this  tax  is  its  simplicity 
and  ease  of  administration.  But  a  tax  in  such  form  is  peculiarly 
liable  to  be  shifted,  a  fact  which  probably  led  to  the  adoption  of 
rates  so  low  that  they  yield  but  slight  revenue.  The  returns  show 
187,200,000  bushels  of  grain  handled,  in  1910  andtaxes  amount* 
ing  to  $35,000.  The  Tax  Commission  recommends  that  the  rates 
be  quadrupled  if  this  form  of  tax  is  retained. 

Iowa  has  a  law  similar  to  that  of  Nebraska,  which  applies, 
however,  to  dealers  in  ice  and  coal  as  well  as  to  dealers  in  grain. 
The  secretary  of  the  executive  council  informs  us  that  the  law  is 
generally  ignored  and  dealers  in  grain  are  assessed  as  a  matter  of 
practice  on  the  basis  of  the  property  held  on  assessment  day. 

Kansas  assesses  all  merchants  including  grain  dealers  upon 
the  "average  value  of  such  articles  of  personal  property  which  he 
shall  have  had  in  his  possession  or  under  his  control  during  the 
year/'  Whether  such  a  plan  is  desirable  or  not  may  be  questioned, 
but  if  applied  to  grain  dealers  it  seems  clear  that  it  should  also  be 
applied  to  live  stock,  ice  and  coal  dealers,  and  to  all  others  whose 
stocks  fluctuate  greatly  from  time  to  time.  The  Kansas  Tax 
Commission  reports  that  the  law  gives  general  satisfaction.  That 
Commission  has  worked  out  a  form  of  statement  for  the  aid  of 
assessors  in  finding  the  average  amount  on  hand,  which  if  adopted 
in  this  state  would  enable  the  assessors  to  find  the  average  capital 
employed  with  far  greater  accuracy  than  is  now  secured.  A 
sample  statement  for  a  month's  business  shown  in  the  table  below. 

Conclusions  and  Recommendations. — In  view  of  the 
uncertain  operation  of  the  present  law  and  the  irritation  caused 
by  the  attempt  to  determine  the  average  capital  employed,  we 
recommend  the  repeal  of  Section  6333  R.  S.,  providing  for  the 
assessment  of  grain  dealers.  This  would  place  these  dealers  under 
the  general  rule  of  assessment  on  the  basis  of  the  property  held 
on  April  1.  Doubtless  the  difficulties  experienced  prior  to  1903 
would  reappear,  but  it  may  be  questioned  whether  these  difficul- 
ties would  be  any  greater  that  those  under  the  present  law  and 
the  fiscal  effect  of  the  change  would  probably  be  slight. 


196 


Report  of  Nebraska  Tax  Commission 


Date 

Bushels 
Bought 

Days 

on  Hand 

No.  Days 
One  Bushel 
on  Hand 

Bushels 
Sold 

Days  not 
on  Hand 

No.  Days 
One  Bushel 
not  on 
Hand 

1.. 

3,000 

X  31  = 

93,000 

2..  .  . 

2,000 

X  30  = 

60,000 

3...  . 

1,000 

X  29  = 

29,000 

4.... 
5 

4,000 

X  28  = 

112,000 

10,000 

X  27  = 

270,000 

6 

3,000 

X  26  = 

78,000 

.7... 

2,000 

X  25  = 

50,000 

8..  .  . 

5,000 

X  24  = 

120,000 

9 

6,000 

X  23  = 

138,000 

10 

4,000 

X  22  = 

88,000 

11.... 
12 

3,000 

X  21  = 

63,000 

23,000 

X  20  = 

460,000 

13 

2,000 

X  19  = 

38,000 

14 

1,000 

X  18  = 

18,000 



15     .  . 

3,000 

X  17  = 

51,000 

16..  .. 

5,000 

X  16  = 

80,000 

17  

2,000 

X  15  = 

30,000 

18 

1,000 

X   14  = 

14,000 

19 

20.. 
21 

4,000 
3,000 

X  12  = 
X   11  = 

48,000 
33,000 

18,000 

X  11  = 

198,000 

22 

4,000 

X   10  = 

40,000 

23 

2,000 

X     9  = 

18,000 

24..  .. 

1,000 

X     8  = 

8,000 

25 

500 

X     7  = 

3,500 

26 

27 

2,000 

X     5  = 

10,000 

28.. 
29 

1,500 
1  000 

X     4  = 
X     3  - 

6,000 
3  000 

14,000 

X     3  = 

42,000 

30 

2  000 

X     2  - 

4,000 

31 

1,000 

X     1  = 

1,000 

69,000 

1,236,500 

65,000 

970,000 

Total  days  1  bushel  on  hand 1,236,500 

Total  days  1  bushel  not  on  hand 970,000 


Divisor  January  days. 31)266,500 


8,596  +  Ay.  bushels  on  hand 
in  January. 


Appendix  A — Railroad  Companies  197 


APPENDIX  A 

The  Special  Tax  Commission  on  the  Taxation  of  Corpora- 
tions, of  the  state  of  Connecticut  1913,  has  made  the  following 
digest  of  laws  relating  to  the  methods  of  taxing  railroad,  express, 
telegraph,  and  telephone  companies. 

I.   RAILROAD  COMPANIES 

Alabama. — The  State  Board  of  Assessment  values  all  the  property  of 
railroad  companies,  and  this  valuation  is  apportioned  among  the  counties 
and  municipalities  on  the  basis  of  mileage,  the  taxes  being  at  the  rate  of  the 
general  property  tax.  There  are  also  municipal  license  taxes  based  upon  popu- 
lation the  fees  varying  from  $10  in  municipalities  not  exceeding  250  inhabitants 
to  $25  for  the  first  1,000  inhabitants  and  $35  for  each  additional  1,000  in- 
habitants in  places  exceeding  10,000  inhabitants.  Railroad  companies  are 
subject  to  the  State  corporation  license  tax  based  upon  stock,  bonds  and  earn- 
ings at  the  rate  of  the  general  property  tax. 

Street  railway  companies  are  assessed  upon  all  their  property  by  the 
State  Board  of  Assessment,  this  valuation  being  apportioned  to  the  counties 
and  municipalities  upon  the  basis  of  mileage  and  the  taxes  collected  at  the 
rate  of  the  general  property  tax.  In  addition  to  this  tax,  such  companies  may 
be  assessed  by  municipalities  on  their  gross  receipts  as  a  privilege  tax,  the  rate 
not  to  exceed  2%  on  the  gross  receipts;  provided,  that  the  amount  paid  by 
such  companies  to  the  municipalities  as  a  tax  on  intangible  property  shall  be 
allowed  as  a  credit  on  and  against  the  privilege  tax.  Shares  of  stock  are  taxed 
to  the  holders  as  personal  property. 

Arizona. — Railroad  Companies  are  taxed  under  the  general  property 
tax,  the  assessment  being  made  by  the  State  Board  of  Equalization  and  the 
valuation  apportioned  to  the  counties  and  taxing  units,  where  the  taxes  are 
collected  in  the  same  way  and  at  the  same  rate  as  those  upon  property  in  the 
hands  of  individuals. 

Street  railway  companies  are  taxed  upon  all  their  property  in  exactly  the 
same  way  as  property  in  the  hands  of  individuals  is  taxed. 

Arkansas. — Railroad  companies  are  taxed  by  the  State  1-20  of  1%  upon 
the  amount  of  capital  stock  and  also  the  value  of  all  their  property,  including 
franchises,  as  assessed  by  the  State  Tax  Commission.  This  valuation  is  ap- 
portioned to  the  taxing  units  on  the  basis  of  mileage  and  the  taxes  collected 
at  the  rate  of  the  general  property  tax. 

Street  railway  companies  are  taxed  as  railroads  except  that  the  assess- 
ment of  their  property  is  made  by  county,  not  State,  officers. 

California. — Railroad  companies  are  taxed  by  the  State  upon  their 
gross  receipts  from  operation  at  the  rate  of  4%  in  (now  4 5%)  lieu  of  all  other 
taxes.  The  gross  receipts  of  companies  doing  an  interstate  business  are  deemed 
to  be  all  receipts  on  business  beginning  and  ending  within  the  State  and  a 


198  Report  of  Nebraska  Tax  Commission 

proportion,  based  upon  mileage,  of  the  receipts  from  business  passing  through, 
into,  or  out  of  the  State. 

Colorado. — The  total  property  of  railroad  companies  is  assessed  by  the 
State  Tax  Commission  and  the  valuation  apportioned  to  the  counties  and  tax- 
ing districts  upon  the  basis  of  mileage,  the  taxes  being  collected  locally  at  the 
same  rate  and  in  the  same  way  as  those  upon  property  in  the  hands  of  individ- 
uals. Such  companies  also  pay  a  State  license  tax  of  2  cents  on  each  $1,000 
of  authorized  capital  stock. 

Street  railway  companies  operating  in  more  than  one  county  are  taxed 
in  the  same  way  as  railroad  companies.  If  operating  in  only  one  county  they 
are  assessed  by  the  local  assessor. 

Delaware. — All  railroads  operating  within  the  State  are  permitted  to 
pay  to  the  State  fixed  lump  sums  in  lieu  of  all  other  State  taxes.  Theoretically, 
in  place  of  these  commutation  taxes,  railroads  are  subject  to  State  taxes  at 
the  following  rates:  on  passengers,  10  cents  each;  on  net  income,  10%;  on 
rolling  stock:  locomotives,  $100  each,  passenger  cars,  $25  each,  freight  cars, 
$10  each;  on  capital  stock,  actual  cash  value,  \  of  1%.  Any  tangible  property 
located  outside  the  right  of  way  is  subject  to  local  taxation  under  the  general 
property  tax. 

Street  railway  companies  are  not  subject  to  taxation  by  the  State,  but 
all  their  property  is  assessed  and  taxed  by  the  counties  and  municipalties  as 
property  in  the  hands  of  individuals  is  taxed. 

District  of  Columbia. — Railroad  companies  are  taxed  by  the  District 
on  all  their  property  under  the  general  property  tax. 

Street  railway  companies  are  taxed  4%  upon  their  gross  receipts  within 
the  District  and  the  general  property  tax  upon  their  real  property.  The 
tracks,  however,  are  not  regarded  as  real  property. 

Florida. — Railroad  companies  are  taxed  upon  all  their  assets  under  the 
general  property  tax,  and  in  addition  are  subject  to  a  State  license  tax  of  $10 
for  every  mile  of  track  in  the  State,  including  branches  and  side  tracks.  One- 
half  of  this  tax  is  distributed  to  the  counties  on  the  basis  of  mileage  and  one- 
half  retained  by  the  State.  The  municipalities  also  impose  license  taxes  based 
upon  population,  the  fees  varying  from  $10  to  $250.  Shares  of  stock  are 
taxable  to  the  holders. 

Georgia.— Railroad  companies  are  assessed  by  the  State  Comptroller 
upon  the  total  amount  of  their  property,  including  indebtedness  and  franchises; 
this  valuation  is  apportioned  to  the  local  taxing  units  and  the  tax  collected  in 
the  same  way  and  at  the  same  rate  as  that  upon  property  in  the  hands  of 
individuals.  Such  companies  are  also  subject  to  State  license  tax  upon  the 
authorized  amount  of  capital  stock,  the  fees  varying  from  $5  to  $75. 

Idaho. — Railroad  companies  are  assessed  by  the  State  Board  of  Equaliza- 
tion upon  all  their  property,  this  valuation  being  apportioned  to  the  counties 
upon  the  basis  of  mileage,  and  the  taxes  collected  at  the  same  rate  and  in  the 
same  way  as  those  upon  property  in  the  hands  of  individuals.  In  addition  to 
this,  there  is  a  State  license  tax  upon  the  authorized  amount  of  capital  stock, 
the  fees  varying  from  $10  to  $150  according,  to  the  amount  of  stock. 


Appendix  A — Railroad  Companies  199 

Illinois. — Railroad  companies,  with  the  exception  of  the  Illinois  Central 
Railroad  Company,  are  taxed  at  the  rate  of  the  general  property  tax  upon  all 
property,  tangible  and  intangible,  as  assessed  by  the  State  Board  of  Equaliza- 
tion, the  valuation  being  apportioned  to  the  taxing  districts  and  the  taxes 
collected  locally. 

The  Illinois  Central  Railroad  Company,  by  the  charter  act,  is  subject  to  a 
State  tax  of  7%  of  the  gross  receipts  of  the  main  or  charter  lines,  with  main 
trackage  of  705.5  miles  within  the  State,  in  lieu  of  all  other  taxes  upon  the 
charter  lines.  The  property  of  roads  acquired  by  the  company  since  the  grant- 
ing of  the  charter  act  is  assessed  and  taxed  the  same  way  as  the  property  of 
other  railroads. 

Street  railroads  incorporated  under  the  general  railroad  act  are  taxed  in 
the  same  way  as  steam  roads.  Street  railroads  incorporated  under  the  general 
corporation  act  are  assessed  by  the  State  Board  of  Equalization  upon  the  market 
value  of  their  stocks  and  bonds,  including  franchise,  deducting  from  this 
valuation  the  assessed  value  of  all  tangible  property.  The  remainder  is  taxed 
at  the  rate  of  the  general  property  tax  at  the  principal  office  of  the  company. 
Tangible  property  is  assessed  and  taxed  locally  under  the  general  property  tax . 

Indiana. — The  railroad  track,  appliances,  and  rolling  stock  of  railroad 
companies  are  assessed  by  the  State  Tax  Commissioners,  and  this  valuation  is 
apportioned  to  the  counties  and  taxing  districts,  where  the  taxes  are  collected 
at  the  same  rate  and  in  the  same  manner  as  those  upon  property  in  the  hands 
of  individuals. 

All  real  estate  other  than  track  and  all  personalty  such  as  machinery  in 
shops,  ties,  rails,  and  other  supplies  on  hand  are  assessed  and  taxed  locally 
under  the  general  property  tax. 

Iowa. — Railroad  companies  are  assessed  by  the  State  Council  upon  all 
property,  including  franchise,  and  this  valuation  is  apportioned  to  the  counties 
upon  the  basis  of  mileage,  the  taxes  being  collected  at  the  same  rate  and  in  the 
same  way  as  those  upon  the  property  of  individuals. 

The  entire  property  of  street  railway  companies  is  assessed  and  taxed  in 
exactly  the  same  manner  as  property  in  the  hands  of  individuals  is  assessed  and 
taxed.  It  is  provided  that  the  franchise  of  such  companies  shall  not  be  assessed. 
The  value  of  the  shares  of  stock  over  and  above  the  value  of  the  assessed 
property  of  the  company  is  assessed  to  the  holders  at  the  principal  office  of  the 
company,  the  valuation  being  made  by  the  assessor  of  the  county  in  which  such 
office  is  located. 

Kansas. — The  property  of  all  railroad  companies  is  assessed  by  the  State 
Tax  Commission  and  this  valuation  apportioned  to  the  taxing  districts  upon 
the  basis  of  mileage,  the  taxes  being  collected  locally  at  the  rate  of  the  general 
property  tax.  Shares  of  stock  of  foreign  companies  having  their  principal 
office  outside  the  State  are  taxed  to  the  holders. 

Kentucky. — Railroad  companies  are  assessed  by  a  State  board  upon  the 
value  of  the  franchise,  which  value  is  determined  by  subtracting  from  the  value 
of  the  capital  stock  the  value  of  all  tangible  property  otherwise  assessed.  This 
franchise  valuation  is  apportioned  to  the  taxing  districts  where  the  franchise 


200  Report  of  Nebraska  Tax  Commission 

is  exercised  and  there  taxed  at  the  same  rate  as  the  property  of  individuals. 
All  tangible  property  is  assessed  also  by  the  State  board  and  taxed  locally 
under  the  general  property  tax.  Domestic  companies  doing  business  entirely 
without  the  State  pay  a  State  tax  of  1  %•  upon  the  authorized  amount  of  capital 
stock  in  lieu  of  all  other  taxes  within  the  State.  Shares  of  foreign  companies 
not  owning  property  within  the  State  are  taxed  to  the  holders. 

Street  railway  companies  are  taxed  in  the  same  way  as  railroad  companies 
except  that  the  assessment  of  tangible  property  is  made  by  local  officers  and 
not  by  the  State  board. 

Louisiana. — Railroad  companies  are  taxed  upon  all  their  property,  in- 
cluding franchisas,  as  assessed  by  the  State  Board  of  Appraisers,  the  valua- 
tion being  apportioned  to  the  parishes  and  municipalities  where  the  taxes  are 
collected  at  the  same  rate  as  those  upon  property  in  the  hands  of  individuals. 

Street  railway  companies  are  subject  to  the  same  ad  valorem  taxes  as 
steam  roads,  and  in  addition  pay  a  license  tax  of  3-8  of  1  %  upon  gross  earnings 
within  the  State.  Municipal  license  taxes  based  upon  gross  receipts  are  also 
allowed. 

Maine. — Railroad  companies  are  taxed  by  the  State  upon  their  gross 
receipts  within  the  State  at  a  rate  of  \  of  1%  if  the  receipts  do  not  exceed 
$1,500  per  mile,  the  rate  increasing  \  of  1%  for  each  additional  $500  of  receipts 
per  mile,  provided  that  in  no  case  shall  the  rate  exceed  5|%?  This  tax  is  ap- 
portioned to  the  cities  and  towns  in  which  owners  of  stock  reside  as  follows: 
1%  of  the  value  of  stock  owned  in  said  cities  and  towns,  with  provision  that 
the  amount  apportioned  shall  not  be  a  greater  part  of  the  whole  tax  received 
than  the  proportion  which  stock  owned  in  the  State  bears  to  the  total  amount 
of  stock,  and  provided  that  the  amount  so  apportioned  shall  not  exceed  the  total 
amount  received  from  the  tax  upon  the  receipts.  The  remainder  of  the  tax  is 
retained  by  the  State.  Buildings,  whether  within  or  without  the  right  of  way, 
and  lands  and  fixtures  without  the  right  of  way  are  not  considered  operative 
property  and  are  taxed  where  located  as  the  property  of  individuals  is  taxed. 

Street  railway  companies  are  taxed  upon  their  gross  receipts  within  the 
State  at  a  rate  of  \  .of  1%  if  the  receipts  do  not  exceed  $1,000  per  mile,  the  rate 
increasing  3-20  of  1%  for  each  additional  $1,000  or  fraction  thereof  of  receipts 
per  mile,  but  in  no  case  to  exceed  4%.  The  tax  is  apportioned  in  the  same  way 
as  the  tax  upon  railroad  companies. 

Maryland. — Railroad  companies  are  taxed  by  the  State  upon  their  gross 
receipts  within  the  State  at  the  following  rates:  \\%  on  the  first  $1,000  of 
gross  earnings  per  mile;  2%  on  earnings  of  $1,000  to  $2,000  per, mile;  2\%  on 
earnings  of  over  $2,000  per  mile.  Local  taxes  upon  real  and  personal  property 
tax  in  the  same  way  as  those  upon  the  property  of  natural  persons.  The 
Baltimore  and  Ohio  Railroad  Company  has  a  special  contract  with  the  State 
whereby  it  escapes  the  regular  gross  receipts  tax,  and  pays  instead  a  tax  of  £ 
of  1%  upon  gross  earnings  in  Maryland. 

Street  railway  companies  are  assessed  and  taxed  under  the  general  prop- 
erty tax  upon  the  value  of  all  shares  of  capital  stock  and  real  property,  the 
assessment  of  stock  being  made  by  the  State  Tax  Commissioner  and  the  valua- 


Appendix  A — Railroad  Companies  201 

tion  apportioned  to  the  counties  where  the  holders  reside.  Shares  of  stock  in 
foreign  companies  are  taxed  to  the  holders  at  the  rate  of  30  cents  on  each  $100, 
except  in  case  no  dividends  have  been  paid,  when  such  shares  are  exempt. 

Massachusetts. — Railroad  companies  are  taxei  by  the  State  upon  the 
margin  of  intangible  value  found  by  deducting  the  assessed  value  of  certain 
tangible  property,  which  is  taxed  to  the  corporation  by  local  units,  from  the 
cash  value  of  so  much  of  the  capital  stock  as  is  proportional  to  that  part  of  its 
line  within  the  State,  determined  on  the  basis  of  miles  of  line.  This  tax  is  at 
a  rate  equal  to  the  average  of  the  rates  of  the  general  property  tax  for  the  three 
preceding  years.  Such  a  proportion  of  the  tax  as  corresponds  to  the  proportion 
of  its  stock  owned  by  residents  of  the  State  is  distributed  to  the  towns  in  which 
the  owners  reside,  and  the  remainder  is  retained  by  the  State  for  its  own  use. 
The  right  of  way  is  exempt  from  local  taxation. 

Street  railway  companies  are  subject  to  the  corporate  excess  tax  in  the 
same  way  as  railroad  companies.  In  the  case  of  street  railways  the  tax  is  dis- 
tributed to  the  local  units  upon  the  basis  of  location  of  track.  In  addition  to 
the  above  tax,  such  companies  are  subject  to  a  "commutation"  tax  imposed  by 
local  authorities  on  an  amount  equal  to  such  proportion  of  designated  percentage 
of  gross  receipts  (including  income  from  other  sources  than  operation  of  road) 
as  the  length  of  track  in  the  public  places  of  the  city  or  town  bears  to  the  total 
length  of  track  in  all  public  places.  This  tax,  which  is  at  the  rate  of  the  general 
property  tax,  is  for  the  use  of  the  towns.  The  designated  percentages  of  gross 
receipts  vary  from  1%  if  the  annual  gross  receipts  per  mile  are  $4,000  or  less 
to  3%  if  the  gross  receipts  per  mile  are  $28,000  or  more. 

Michigan. — Railroad  companies  are  taxed  by  the  State  at  the  average 
rate  of  the  general  property  tax  upon  all  property  owned  in  the  State,  (except 
real  estate  not  essential  to  the  business  and  which  is  subject  to  local  taxation, 
as  assessed  by  the  State  Assessors).  For  the  year  1912  and  thereafter  there  is 
imposed  by  the  State  a  tax  upon  the  shares  of  capital  stock  of  2%  of  the  par 
value  and  upon  the  indebtedness  of  1  %  of  the  face  value,  which  taxes  are  to  be 
paid  by  the  corporation  and  not  by  the  holders  of  the  stock  and  bonds. 

Street  railway  companies  are  taxed  upon  all  their  property  for  State  and 
local  purposes  under  the  general  property  tax,  real  estate  being  assessed  at  its 
situs  and  all  personal  property  at  the  principal  office  of  the  company. 

Minnesota. — Railroad  companies  are  taxed  by  the  State  upon  their  gross 
earnings  from  operation  at  the  rate  of  5%  in  lieu  of  all  other  taxes.  The  gross 
earnings  of  companies  doing  an  interstate  business  include  a  proportionate 
share,  based  upon  mileage,  of  the  interstate  gross  receipts  from  operation. 

The  property  of  street  railway  companies  is  assessed  and  taxed  as  that 
of  individuals,  stocks  and  bonds  being  assessed  at  market  value.  Shares  of 
stock  in  foreign  companies  are  taxed  to  the  holders. 

Mississippi. — Railroad  companies  are  subject  to  taxation  upon  all  their 
property  as  asssssad  by  the  State  Board  of  Assessors,  the  valuation  being 
apportioned  to  the  taxing  districts  and  taxed  at  the  rate  of  the  general  property 
tax.  They  also  pay  a  State  privilege  tax  varying  from  $2  to  $22.50  per  mile, 


202  Report  of  Nebraska  Tax  Commission 

according  to  the  classification  of  track.    Roads  claiming  exemption  from  State 
supervision  under  charter  provisions,  pay  an  additional  $10  per  mile  of  track. 

Street  railways  are  subject  to  the  same  ad  valorem  taxes  as  steam  roads, 
but  pay  a  privilege  tax  of  $20  per  mile  of  track. 

Missouri. — Railroad  companies  are  taxed  upon  all  their  property,  in- 
cluding franchises,  at  the  rate  of  the  general  property  tax,  the  assessment  being 
made  by  the  State  board  and  the  valuation  apportioned  to  the  taxing  districts 
where  the  tax  is  collected  as  that  upon  the  property  of  natural  persons.  Local 
property  is  assessed  by  local  officers.  Shares  in  foreign  companies  are  taxed 
to  the  holders  at  market  value. 

Montana. — The  franchises,  roadways,  roadbeds,  and  rolling  stock  of 
all  roads  operating  in  more  than  one  county  are  assessed  by  the  State  Board 
of  Equalization;  all  other  property  by  the  assessors  of  the  county  in  which  such 
property  is  located.  The  valuation  of  the  property  assessed  by  the  State 
Board  is  apportioned  to  the  counties  upon  the  basis  of  mileage  and,  together 
with  the  property  assessed  locally,  taxed  locally  in  the  same  manner  as  the 
property  of  individuals  is  taxed.  In  addition  to  these  ad  valorem  taxes  rail- 
road companies  are  subject  to  State  license  fees  based  upon  gross  receipts,  the 
fees  varying  from  $5  to  $225  per  quarter  according  to  the  amount  of  receipts. 

The  property  of  street  railway  companies  is  assessed  and  taxed  exactly 
as  property  in  the  hands  of  individuals.  The  capital  stock  and  franchises  are 
assessed  at  the  principal  office  of  the  company  and  other  property  where 
situated.  In  addition  to  this  ad  valorem  tax,  such  companies  pay  license  fees, 
varying  from  $25  to  $50  per  quarter,  according  to  population. 

Nebraska. — Railroad  companies  are  assessed  by  the  State  Board  of 
Equalization  upon  all  property,  including  franchises,  except  certain  buildings 
and  real  and  personal  property  outside  the  right  of  way,  which  property  is 
assessed  and  taxed  as  that  of  individuals.  The  valuation  made  by  the  State 
Board  is  apportioned  to  the  counties  and  taxing  districts  upon  the  basis  of 
mileage  and  the  taxes  are  collected  at  the  same  rate  and  in  the  same  way  as 
those  upon  the  property  of  individuals.  The  railroad  companies  are  also  sub- 
ject to  the  State  tax  upon  capital  stock,  the  fees  of  which  range  from  $5  to 
$2,500. 

Street  railway  companies  are  taxed  locally  under  the  general  property 
tax  upon  all  property  and  franchises.  They  are  also  subject  to  the  State  tax 
based  upon  the  capital  stock,  the  fees  varying  from  $5  to  $2,500. 

Nevada. — Railroad  companies  are  taxed  upon  all  their  property  under 
the  general  property  tax,  the  assessment  being  made  by  the  State  Board  and 
the  valuation  apportioned  to  the  taxing  districts  where  the  taxes  are  collected. 
Foreign  companies  are  subject  to  retaliatory  provisions. 

New  Hampshire. — Railroad  companies  are  taxed  upon  all  their  property, 
including  franchises,  as  assessed  by  the  State  Tax  Commission,  at  the  rate  of 
the  general  property  tax.  This  tax  is  distributed  by  the  State  Treasurer  as 
follows:  J  of  the  amount  paid  by  the  corporation  to  each  town  in  which  rail- 
road property  is  located  in  proportion  to  the  amount  of  capital  expended 


Appendix  A — Railroad  Companies  203 

therein  for  buildings  and  right  of  way;  to  each  town  in  which  owners  of  stock 
reside  such  proportion  of  residue  as  the  number  of  shares  owned  therein  bears 
to  total  number  of  shares;  the  remainder  is  retained  by  the  State  for  its  own 
use. 

New  Jersey. — Railroad  companies  are  taxed  upon  all  property,  including 
franchise,  as  assessed  by  the  State  Board  of  Equalization,  the  tax  being  at  the 
rate  of  the  general  property  tax.  The  taxes  collected  upon  real  estate  used  for 
railroad  purposes  and  roadbed  other  than  main  stem  are  apportioned  to  the 
districts  in  which  such  property  is  located.  The  taxes  upon  all  other  property 
used  in  the  business  are  collected  by  the  State  for  State  and  school  purposes. 

Street  railways  are  taxed  by  the  State  for  State  use  upon  their  gross  receipts 
from  business  done  within  the  State  and  a  proportionate  share  of  interstate 
earnings  at  the  rate  of  5%.  In  addition  to  this,  all  real  and  personal  property 
is  taxed  under  the  general  property  tax. 

New  Mexico. — Railroad  companies  are  assessed  and  taxed  upon  all  their 
property  as  valued  by  the  State  Board  of  Equalization,  the  valuation  being 
apportioned  to  the  counties  and  municipalities  and  the  taxes  collected  in  the 
same  way  and  at  the  same  rate  as  those  upon  property  in  the  hands  of  in- 
dividuals. 

New  York. — Railroad  companies  are  subject  to  a  State  tax  upon  gross 
earnings  from  business  wholly  within  the  State  at  the  rate  of  \  of  1%,  and  to 
a  State  franchise  tax  upon  capital  stock,  the  rates  varying  from  \  of  a  mill  per 
$1  for  each  1%  of  dividends  declared  to  1|  mills  on  each  $1  of  capital  stock 
employed  in  the  State,  according  to  the  amount  of  dividends  declared.  In 
addition  to  these  taxes,  such  companies  are  assessed  and  taxed  upon  all  tang- 
ible property  in  the  same  way  as  the  property  of  individuals  is  taxed,  this  tax 
being  for  local  use  only.  Foreign  companies  also  pay  an  additional  State  license 
fee  of  |  of  1  %  upon  the  capital  stock  employed  in  the  State. 

Elevated  railway  companies  and  surface  railroads  not  operated  by  steam 
are  taxed  by  the  State  upon  their  gross  earnings  within  the  State  at  the  rate  of 
1  %  and  upon  dividends  declared  in  excess  of  4  %  on  paid-up  capital  at  the 
rate  of  3  %.  In  addition  to  these  taxes  such  companies  are  assessed  and  taxed 
under  the  general  property  tax  upon  all  tangible  property  and  incorporeal 
rights,  the  valuation  of  special  franchises  being  determined  by  the  State  Board 
of  Tax  Commissioners.  Foreign  companies  also  pay  an  additional  state 
license  fee  of  f  of  1  %  upon  the  capital  stock  employed  in  the  state. 

North  Carolina. — Railroad  companies  are  assessed  by  the  State  Tax 
Commission  upon  all  their  property,  including  franchises  and  mortgages  upon 
such  property,  the  valuation  being  apportioned  to  the  counties  and  taxing 
districts  where  the  taxes  are  levied  at  the  rate  of  the  general  property  tax. 
In  addition  to  the  ad  valorem  taxes,  such  companies  are  taxed  by  the  state 
upon  their  gross  receipts  at  rates  varying  from  $2  to  $5  per  mile  of  route, 
according  to  the  amount  of  receipts. 

North  Dakota. — Railroad  companies  are  taxed  upon  all  their  property 
under  the  general  property  tax,  the  assessment  of  real  estate  being  made  by 


204  Report  of  Nebraska  Tax  Commission 

local  and  that  franchise,  roadway,  roadbed,  rails,  and  rolling  stock  by  the 
State  Board  of  Equalization.  The  valuation  made  by  the  State  Board  is 
apportioned  to  the  counties  upon  the  basis  of  mileage  and  the  taxes  collected 
locally.  In  unorganized  counties  the  taxes  are  collected  by  the  State  Auditor 
for  State  use  only. 

Ohio.— Railroad  companies  are  taxed  by  the  state  upon  their  gross  earn- 
ings from  interstate  business  at  the  rate  of  4%  and  in  addition  to  this  are  taxed 
upon  all  their  property  as  assessed  by  the  State  Tax  Commission,  the  valuation 
being  apportioned  to  the  taxing  districts  upon  the  basis  of  mileage  and  property 
operated  and  the  taxes  collected  in  the  same  way  and  at  the  same  rate  as  those 
upon  the  property  of  natural  persons. 

Street  railway  companies  are  taxed  in  the  same  way  as  railroad  companies 
except  that  the  state  tax  upon  gross  earnings  is  at  the  rate  of  1.2%  for  street 
railway  companies  instead  of  4%  as  is  the  case  for  steam  roads. 

Oklahoma.— Railroad  companies  are  taxed  upon  all  their  property  under 
the  general  property  tax,  the  assessments  being  made  by  either  state  or  local 
officers.  Shares  of  stock  are  taxed  to  the  holders  as  personal  property. 

Oregon. — Railroad  companies  are  taxed  upon  all  their  property  under 
the  general  property  tax.  Shops,  grain  elevators  and  warehouses,  and  all  real 
and  personal  property  devoted  to  navigation  are  assessed  where  situated  by 
local  officers.  All  other  property  is  assessed  by  the  State  Board  and  the  valu- 
ation apportioned  to  the  taxing  districts  upon  the  basis  of  mileage. 

Pennsylvania. — Railroad  companies  are  taxed  by  the  state  as  follows: 
5  mills  on  each  $1  actual  value  of  capital  stock;  8  mills  on  each  $1  of  gross 
receipts  from  traffic  wholly  within  the  state;  4  mills  on  each  $1  of  bonds  owned 
within  the  state.  The  capital  stock  tax  on  interstate  roads  is  computed  on  the 
basis  of  mileage.  In  addition  to  these  state  taxes,  real,  and  personal  property 
necessary  to  the  business  is  taxed  locally  under  the  general  property  tfex  in 
Pittsburgh  and  Philadelphia,  but  such  property  is  exempt  elsewhere.  The 
Erie  Railroad  Company  pays  a  special  state  bonus  of  $10,000  per  annum, 
which  bonus  is  distributed  to  the  counties  through  which  the  line  of  the  com- 
pany passes,  upon  the  basis  of  mileage. 

Rhode  Island. — Railroad  companies  are  taxed  by  the  state  upon  their 
gross  earnings  from  operation  within  the  state  at  the  rate  of  1%  in  lieu  of  all 
other  taxes  upon  intangible  personal  property  or  corporate  excess.  Tangible 
personal  property  and  real  estate  are  assessed  and  taxed  locally  under  the 
general  property  tax. 

Street  railway  companies  are  subject  to  the  same  taxes  as  other  railroads 
with  these  additional  taxes:  If  the  annual  dividend  paid  by  any  such  company 
during  the  year  preceding  assessment  is  8%,  on  its  capital  stock  outstanding 
during  such  year,  or  less  then  8%,  or  if  no  dividend  be  paid,  the  franchise  tax 
shall  be  1%  of  the  gross  earnings;  but  if  the  dividend  exceeds  8%  the  franchise 
tax  shall  be  a  sum  equal  to  the  excess  of  such  dividend  over  8%,  but  in  no  case 
shall  the  franchise  tax  be  less  than  1  %  of  the  gross  earnings. 

South  Carolina. — Railroad  companies  are  taxed  by  the  State  upon  their 
gross  receipts  from  business  done  within  the  State  at  the  rate  of  3  mills.  In 


Appendix  A — Railroad  Companies  205 

addition  to  this  they  are  taxed  upon  all  property  as  assessed  by  the  State  Board 
of  Assessors,  the  valuation  being  apportioned  to  the  counties  and  taxing  districts 
upon  the  basis  of  mileage  and  the  taxes  collected  in  the  same  way  and  at  the 
same  rate  as  those  upon  property  in  the  hands  of  individuals. 

South  Dakota.— Railroad  companies  are  taxed  upon  all  their  property 
at  the  rate  of  the  general  property  tax  as  assessed  by  the  State  board,  the  valu- 
ation being  apportioned  to  the  counties  upon  the  basis  of  mileage  and  the  taxes 
collcted  locally  in  the  same  manner  as  those  upon  property  in  the  hands  of 
individuals.  Shares  of  stock  are  taxed  to  the  holders. 

Street  railway  companies  are  taxed  under  the  general  revenue  law  only. 

Tennessee. — Railroad  companies  are  assessed  and  taxed  upon  all  property 
under  the  general  property  tax;  all  property  having  an  actual  situs  is  assessed 
by  local  authorities  in  the  district  where  such  property  is  located;  the  roadbed, 
rolling  stock,  franchises  and  all  personal  property  having  no  actual  situs  are 
assessed  by  the  State  Tax  Commissioners,  this  valuation  being  apportioned 
to  the  counties  and  cities  upon  the  basis  of  mileage.  In  the  case  of  railroad 
companies  the  State's  share  of  the  taxes  collected  under  the  general  property 
tax  shall  be  paid  directly  to  the  State  Comptroller,  the  remainder  being  col- 
lected by  the. taxing  districts  in  the  same  way  as  the  taxes  upon  the  property 
of  individuals  are  collected.  Street  railway  companies  also  pay  county  license 
fees  varying  from  $3  to  $10  per  mile  according  to  population. 

Texas. — Railroad  companies  are  assessed  by  the  State  board  upon  all 
intangible  property,  the  value  being  determined  as  that  of  the  market  value 
of  capital  stock  plus  all  indebtedness  secured  by  mortgage  or  lien,  less  the  value 
of  all  tangible  property.  This  valuation  of  intangible  property  is  apportioned 
to  the  counties  and  taxing  districts  upon  the  basis  of  mileage  and  the  taxes 
upon  it  collected  at  the  same  rate  and  in  the  same  manner  as  those  upon  prop- 
erty in  the  hands  of  individuals.  All  tangible  property  of  railroad  companies 
is  assessed  and  taxed  as  that  of  individuals. 

Street  railway  companies  are  taxed  by  the  State  upon  their  gross  receipts 
at  the  following  rates:  if  in  or  connecting  any  town  of  less  than  20,000  in- 
habitants, the  rate  is  £  of  1%;  if  more  than  20,000  inhabitants,  f  of  1%;  if 
wholly  within  a  town  of  less  than  10,000  inhabitants  such  companies  are  ex- 
empt from  the  gross  receipts  tax.  In  addition  to  this  tax  all  such  companies 
are  taxed  upon  all  their  tangible  property  in  the  same  manner  as  individuals. 

Utah. — Railroad  companies  are  taxed  upon  all  their  property,  including 
franchises,  under  the  general  property  tax,  the  assessment  being  made  by  the 
State  Board  and  the  valuation  apportioned  to  the  taxing  units  where  the  taxes 
are  collected  in  the  same  way  as  those  upon  property  in  the  hands  of  individuals. 
In  addition  to  this  tax,  such  companies  are  subject  to  a  State  license  tax  based 
upon  the  authorized  amount  of  capital  stock,  the  fees  varying  from  $5  to  $50. 
The  property  of  railroad  companies  operating  in  only  one  county  is  assessed 
and  taxed  locally  as  property  of  individuals  is  taxed. 

Vermont. — Railroad  companies  are  assessed  upon  all  their  property, 
including  franchise,  by  the  State  Commission  and  taxed  by  the  State  \\% 


206  Report  of  Nebraska  Tax  Commission 

upon  this  valuation,  or,  in  lieu  of  this  tax  they  may  pay  a  State  tax  upon  gross 
earnings  at  the  following  rates:  2^%  on  such  part  of  gross  earnings  as  does 
not  exceed  $2,000  per  mile  of  roadbed  located  wholly  within  the  State;  2f  % 
on  such  part  of  gross  earnings  as  exceeds  $2,000  and  does  not  exceed  $2,500  per 
mile,  the  rate  increasing  \  of  1%  for  each  additional  increase  of  $500  per  mile, 
up  to  $4,500  per  mile,  and  4%  of  such  part  of  earnings  as  exceeds  $4,500  per 
mile.  Railroad  companies  are  also  subject  to  the  State  license  tax  upon  capital 
stock,  the  fees  varying  from  $10  to  $50. 

Virginia.— Railroad  companies  are  subject  to  the  State  property  tax 
upon  all  property  as  assessed  by  the  State  Corporation  Commission,  the  rate 
of  taxation  being  35  cents  on  $100,  and  are  also  taxed  by  the  State  upon  intra- 
state  gross  receipts  at  the  rate  of  1%.  Local  taxation  of  tangible  property  is 
allowed.  Shares  of  stock  in  foreign  companies  are  taxed  to  the  holders. 

Washington. — Railroad  companies  and  street  railway  companies  are 
assessed  upon  all  their  property,  including  franchise,  by  the  State  Board  of 
Tax  Commissioners,  the  valuation  being  apportioned  to  the  counties  and 
taxing  districts  upon  the  basis  of  mileage  and  the  taxes  collected  at  the  same 
rate  and  in  the  same  manner  as  those  upon  property  in  the  hands  of  individuals. 

West  Virginia. — Railroad  companies  are  taxed  upon  all  their  property 
at  the  rate  of  the  general  property  tax,  the  assessment  being  made  by  the 
State  board  and  the  taxes  collected  by  the  State  Auditor  who  apportions  the 
funds  to  the  various  taxing  districts.  These  companies  are  also  subject  to 
the  State  license  fee  on  the  authorized  amount  of  capital  stock,  the  amounts 
varying  from  $10  if  the  stock  is  $5,000  or  less  to  $170  if  the  stock  is  $1,000,- 
000,  with  an  additional  fee  of  $60  on  each  million  dollars  or  fraction  there- 
of in  excess  of  one  million. 

Wisconsin. — Railroad  companies  are  taxed  upon  all  their  property,  in- 
cluding franchises,  by  the  State  at  the  rate  of  the  general  property  tax  as  de- 
termined by  the  State  Tax  Commission.  Eightyfive  per  cent  of  this  tax  is 
distributed  to  the  local  taxing  districts  in  proportion  to  the  business  transacted 
and  property  located  therein. 

Wyoming. — All  property  of  railroad  companies  is  assessed  by  the  State 
Board  and  the  valuation  apportioned  to  the  various  taxing  districts  where  the 
taxes  are  collected  at  the  same  rate  and  in  the  same  way  as  those  upon  property 
in  the  hands  of  individuals.  Local  assessment  and  taxation  by  incorporated 
towns,  villages,  and  cities  are  allowed. 

II.  EXPRESS  COMPANIES 

Alabama. — Express  companies  are  taxed  upon  all  their  property  locally 
under  the  general  property  tax  in  the  same  way  as  individuals  are  taxed;  in 
addition  to  this  they  are  subject  to  a  State  privilege  tax  based  upon  the  number 
of  miles  of  railroad  over  which  they  operate;  companies  operating  on  less 
than  50  miles  of  railroad  pay  an  annual  tax  of  $250,  those  operating  on  from 
50  to  200  miles,  $1,000;  those  operating^  on  from  200  to  500  miles,  $2,000; 
over  500  miles,  $4,000.  Municipal  taxes,  varying  from  $2.50  to  $500  according 


Appendix  A — Express  Companies  207 

to  population,  are  also  allowed.  Express  companies  are  also  subject  to  the 
State  corporation  license  tax  upon  stock,  bonds,  and  earnings,  at  the  rate  of 
the  general  property  tax. 

Arizona. — Express  companies  are  taxed  by  the  State  upon  their  gross 
receipts  from  business  done  within  the  State  at  the  rate  of  5%,  in  lieu  of  all 
other  taxes  upon  the  property  of  such  companies. 

Arkansas. — Express  companies  are  taxed  by  the  State  1-20  of  1%  upon 
the  amount  of  capital  stock  and  also  upon  the  market  value  of  the  stocks  and 
bonds  as  assessed  by  the  State  Commission.  The  valuation  of  the  Commission 
is  apportioned  to  the  taxing  units  on  the  basis  of  mileage  and  the  taxes  col- 
lected at  the  rate  of  the  general  property  tax. 

California. — Express  companies  are  taxed  by  the  State  upon  their  gross 
receipts  from  operation  at  the  rate  of  2%  (since  increased)  in  lieu  of  all  other 
taxes.  The  gross  receipts  of  companies  doing  an  interstate  business  are  deemed 
to  be  all  receipts  on  business  beginning  and  ending  within  the  State  and  a 
proportion,  based  upon  mileage,  of  the  receipts  from  business  passing  through, 
into,  or  out  of  the  State. 

Colorado. — The  total  property  of  express  companies  is  assessed  by  the 
State  Tax  Commission  and  the  valuation  apportioned  to  the  counties  and 
taxing  districts  upon  the  basis  of  mileage,  the  taxes  being  collected  locally  at 
the  same  rate  and  in  the  same  way  as  those  upon  property  in  the  hands  of 
individuals.  Such  companies  also  pay  a  State  license  tax  of  2  cents  on  each 
$1,000  of  authorized  capital  stock. 

Delaware. — Express  companies  are  taxed  by  the  State  upon  their  gross 
receipts  from  business  done  within  the  State  at  the  rate  of  5%,  and  pay  an 
annual  State  license  fee  of  $250.  In  addition  to  these  State  taxes  they  are 
subject  to  taxation  by  the  local  units. upon  all  their  property  under  the  general 
property  tax. 

District  of  Columbia. — Express  companies  are  taxed  by  the  District 
upon  all  their  property  under  the  general  property  tax. 

Florida. — Express  companies  are  taxed  upon  all  their  assets  under  the 
general  property  tax.  In  addition  to  this,  such  companies  are  subject  to  a 
State  license  tax  of  $7,500  and  municipal  license  taxes  based  upon  population, 
the  fees  varying  from  $6  to  $200.  Shares  of  stock  are  taxable  to  the  holders. 

Georgia. — Express  companies  are  assessed  by  the  State  Comptroller 
upon  the  total  amount  of  their  property,  including  indebtedness  and  franchises; 
this  valuation  is  apportioned  to  the  local  taxing  units  and  the  tax  collected  in 
the  same  way  and  at  the  same  rate  as  that  upon  property  in  the  hands  of  in- 
dividuals. Such  companies  are  also  subject  to  a  State  license  tax  upon  the 
authorized  amount  of  capital  stock,  the  fees  varying  from  $5  to  $75. 

Idaho. — In  addition  to  the  State  license  taxes  upon  the  authorized 
amount  of  capital  stock  (fees  varying  from  $10  to  $150)  express  companies 
are  taxed  by  the  State  upon  their  gross  receipts  at  the  rate  of  3%. 


208  Report  of  Nebraska  Tax  Commission 

Illinois. — Domestic  express  companies  are  assessed  by  the  State  Board 
of  Equalization  upon  the  market  value  of  their  stocks  and  bonds,  including  the 
value  of  the  franchise,  deducting  from  this  valuation  the  assessed  value  of  all 
tangible  property.  The  remainder  is  taxed  at  the  rate  of  the  general  property 
tax  at  the  principal  office  of  the  company.  Real  and  personal  property  is 
assessed  and  taxed  locally  under  the  general  property  tax. 

Foreign  companies  are  assessed  and  taxed  upon  tangible  property  only, 
in  the  same  way  as  domestic  companies.  Shares  of  stock  of  foreign  companies 
are  taxed  to  the  holders. 

Indiana. — Express  companies  are  assessed  by  the  State  Tax  Commis- 
sioners upon  the  market  value  of  their  stocks  and  bonds  as  representing  the 
value  of  the  entire  property  of  the  companies.  This  valuation  is  apportioned 
to  the  counties  and  townships  and  the  taxes  collected  at  the  rate  of  the  general 
property  tax.  In  addition  to  this  tax  all  real  estate,  machinery,  structures 
and  appliances  are  taxed  by  the  local  units  in  the  same  way  as  property  of 
individuals  is  taxed. 

Iowa. — Express  companies  are  assessed  by  the  State  Council  upon  all 
property,  including  franchise  and  indebtedness,  and  this  valuation  is  appor- 
tioned to  the  counties  upon  the  basis  of  mileage,  the  taxes  being  collected  at 
the  same  rate  and  in  the  same  manner  as  those  upon  the  property  of  individuals. 
In  addition  to  this,  all  real  estate,  machinery,  etc.  is  taxed  by  the  local  taxing 
districts  in  exactly  the  same  way  as  the  property  of  individuals. 

Kansas. — Express  companies  are  taxed  by  the  State  on  their  gross  re- 
ceipts from  business  done  within  the  State  at  the  rate  of  4  %,  the  gross  receipts 
being  considered  as  the  actual  receipts  of  the  companies  less  amounts  paid 
railroad  companies  for  transportation.  In  addition  to  this  tax  all  tangible 
property  is  assessed  by  the  State  Tax  Commission  and  the  valuation  certified 
to  the  taxing  districts  where  the  property  has  its  situs  and  there  taxed  at  the 
rate  of  the  general  property  tax.  Municipal  license  taxes  are  allowed.  Shares 
of  stock  of  foreign  corporations  whose  principal  office  is  without  the  State  are 
taxed  to  the  holders. 

Kentucky. — Express  companies  are  assessed  by  a  State  Board  upon  the 
value  of  the  franchise,  which  value  is  determined  by  subtracting  from  the 
value  of  the  capital  stock  the  value  of  all  tangible  property  otherwise  assessed. 
This  franchise  valuation  is  apportioned  to  the  taxing  districts  where  the 
franchise  is  exercised  and  there  taxed  at  the  same  rate  as  property  in  the  hands 
of  individuals.  All  tangible  property  is  assessed  and  taxed  by  local  officers 
under  the  general  property  tax.  Domestic  companies  doing  business  entirely 
without  the  State  pay  a  State  tax  of  1  %  upon  the  authorized  amount  of  capital 
stock  in  lieu  of  all  other  taxes  within  the  State.  Shares  of  foreign  companies 
not  owning  property  within  the  State  are  taxed  to  the  holders. 

Louisiana. — Express  companies  are  taxed  upon  all  their  property,  in- 
cluding franchises,  as  assessed  by  the  State  Board  of  Appraisers,  the  valuation 
being  apportioned  to  the  parishes  and  municipalities  where  the  taxes  are  col- 
lected at  the  same  rate  as  those  upon  property  in  the  hands  of  individuals. 
Foreign  companies  are  also  subject  to  a  license  tax  of  $10  on  each  $1,000  of 


Appendix  A — Express  Companies  203 

gross  receipts  within  the  State;  domestic  companies  pay  license  fees  base:! 
upon  gross  receipts  within  the  State,  the  amounts  varying  from  $20  to  $6,250 
according  to  the  amount  of  receipts. 

Maine. — Express  companies  are  taxel  by  the  State  upon  their  gross 
receipts  from  business  done  wholly  within  the  State  and  a  proportional  part 
(based  on  mileage)  of  the  receipts  from  business  coming  from  other  States  or 
countries  into  the  State  and  from  business  going  from  this  to  other  States  or 
countries  at  the  rate  of  4%.  Such  companies  are  also  subject  to  municipal 
taxes  upon  real  estate.  Shares  of  stock  are  taxed  to  the  holders. 

Maryland. — Express  companies  are  taxed  by  the  State  updn  their  gross 
receipts  within  the  State  at  the  rate  of  2|%;  the  capital  stock  is  assessed  by 
the  State  Tax  Commissioner,  the  valuation  being  apportioned  to  the  counties 
where  the  holders  reside  and  there  taxed  in  the  names  of  the  holders,  the 
corporation  paying  the  tax,  which  is  at  the  rate  of  the  general  property  tax. 
All  real  estate  is  taxed  as  that  of  individuals. 

Massachusetts. — From  the  market  valua  of  stocks,  bonis,  and  such 
part  of  the  unfunded  debt  as  was  incurred  for  construction,  permanent  equip- 
ment or  improvement  is  deducted  the  value  of  all  real  and  personal  property 
subject  to  local  taxation  and  securities  not  liable  to  taxation,  and  the  remainder 
is  taxed  by  the  State  at  a  rate  equal  to  the  average  of  the  rates  of  the  general 
property  tax  for  the  three  preceding  years.  The  proportion  to  be  taxed  in  the 
case  of  interstate  companies  is  determined  upon  the  basis  of  gross  receipts. 
Shares  of  stock  in  foreign  express  companies  are  taxed  to  the  holders  at  cash 
value. 

Domestic  business  corporations  organized  to  carry  on  express  business 
are  taxed  upon  their  corporate  excess  as  domestic  business  corporations,  not 
as  express  companies. 

Michigan. — Express  companies  are  taxed  by  the  State  upon  all  property 
as  assessed  by  the  State  Assessors,  the  taxes  to  be  at  the  rate  of  the  general 
property  tax.  All  companies  whose  gross  receipts  are  less  than  $500  per  annum 
are  exempt. 

Minnesota. — Express  companies  are  taxed  by  the  State  upon  their 
gross  earnings  from  intra-state  operations  at  the  rate  of  6%  (now  8%)  in  lieu 
of  all  other  taxes.  In  determining  the  gross  earnings  the  express  privileges  are 
deducted  from  the  gross  receipts. 

Mississippi. — Express  companies  are  subject  to  taxation  upon  all  their 
property  as  assessed  by  the  State  Board  of  Assessors,  the  valuation  being  appor- 
tioned to  the  taxing  districts  and  taxed  at  the  rate  of  the  general  property  tax. 
They  are  also  subject  to  State  privilege  taxes  as  follows:  on  each  company 
$500.00  and  $5  per  mile  of  first  class  railroad  track  in  the  State  over  which 
goods  are  transported;  $3  per  mile  of  second  class  track;  and  $2  per  mile  of  all 
other  track. 

Missouri. — Express  companies  are  taxed  by  the  State  upon  their  gross 
receipts  from  business  done  within  the  State  at  the  rate  of  \\%,  in  addition  to 
local  taxation  upon  property  under  the  general  property  tax. 


210  Report  of  Nebraska  Tax  Commission 

Montana. — The  tangible  property  of  express  companies  is  assessed  and 
taxed  exactly  as  property  in  the  hands  of  individuals.  In  addition  to  this  ad 
valorem  tax,  such  companies  are  subject  to  State  license  fees  based  upon  gross 
receipts,  the  amounts  varying  from  $5  to  $225  per  quarter  according  to  the 
amount  of  the  receipts. 

Nebraska. — Express  companies  are  taxed  locally  under  the  general 
property  tax  upon  all  real  estate,  tangible  property,  and  franchises.  They 
are  also  subject  to  the  State  tax  based  upon  the  authorized  amount  of  capital 
stock,  the  fees  varying  from  $5  to  $2500.  [By  legislation  enacted  in  1913, 
express  companies  are  not  subject  to  the  occupation  tax  based  on  capital 
stock,  but  to  one  based  on  gross  earnings.] 

•  Nevada. — Express  companies  are  taxed  upon  their  property  at  the  rate 
of  the  general  property  tax.  The  total  cash  value  of  all  property  and  franchises 
shall  not  be  assessed  as  less  than  the  largest  amount  on  which  the  net  profit  of 
the  company  for  the  year  previous  to  assessment  will  pay  interest  or  dividends 
at  the  rate  of  8%.  In  computing  the  net  profit  the  annual  deterioration  is  to 
be  allowed  as  an  expense.  Foreign  corporations  are  subject  to  retaliatory  pro- 
visions. 

New  Hampshire. — Express  companies  are  taxed  upon  all  their  property, 
including  franchises  by  the  State,  the  assessment  being  made  by  the  State 
Tax  Commission  and  the  rate  of  taxation  being  fixed  by  such  Commission  at 
a  rate  as  nearly  as  possible  equal  to  that  of  the  general  property  tax. 

New  Jersey. — Express  companies  are  taxed  by  the  State  upon  their  gross 
receipts  from  business  done  within  the  State  and  a  proportionate  share  of  in- 
terstate earnings  at  the  rate  of  2  %.  In  addition  to  this  tax  all  tangible  property 
is  assessed  and  taxed  as  the  property  of  individuals. 

New  Mexico. — Express  companies  are  taxed  by  the  State  upon  their 
gross  earnings  from  business  done  within  the  State  at  the  rate  of  2  %.  Express 
privileges  are  deducted  from  gross  receipts  in  determining  gross  earnings. 
One-half  of  the  tax  is  distributed  to  the  counties  upon  the  basis  of  business 
done,  and  one-half  retained  by  the  State.  In  addition  to  this  tax  upon  gross 
earnings  all  tangible  property  is  taxed  under  the  general  property  tax,  the  val- 
uation being  made  by  the  State  Board  of  Equalization  and  then  apportioned 
to  the  counties. 

New  York. — Express  companies  are  subject  to  a  State  tax  upon  gross 
earnings  from  business  wholly  within  the  State  at  the  rate  of  \  of  1  %,  and  to 
a  State  franchise  tax  upon  capital  stock,  the  rates  varying  from  \  of  a  mill  per 
$1  for  each  1%  of  dividends  declared  to  1^  mills  on  each  $1  of  capital  stock 
employed  in  the  State,  according  to  the  amount  of  dividends  declared.  In 
addition  to  these  taxes,  express  companies  are  assessed  and  taxed  upon  all 
tangible  property  in  the  same  way  as  the  property  of  individuals  is  taxed,  this 
tax  being  for  local  use  only.  Foreign  companies  also  pay  an  additional  State 
license  fee  of  f  of  1  %  upon  the  capital  stock  employed  in  the  State. 

North  Carolina. — Express  companies  are  assessed  by  the  State  Tax 
Commission  upon  all  their  property,  including  franchises  and  mortgages  upon 


Appendix  A — Express  Companies  211 

such  property,  the  valuation  being  apportioned  to  the  counties  and  taxing  dis- 
tricts where  the  taxes  are  levied  at  the  rate  of  the  general  property  tax.  In 
addition  to  these  ad  valorem  taxes,  such  companies  are  taxed  by  the  State 
upon  their  gross  receipts  from  business  wholly  within  the  State  at  the  rate  of 
2|%  and  municipal  privilege  taxes  based  upon  population,  the  fees  varying 
from  $2.50  to  $50,  are  allowed. 

North  Dakota. — Express  companies  are  taxed  upon  all  their  property 
under  the  general  property  tax,  the  assessment  of  real  estate  being  made  by 
local  officers  and  that  of  other  property  by  the  State  Board  of  Equalization. 
The  valuation  made  by  the  State  Board  is  apportioned  to  the  counties  upon 
the  basis  of  mileage  and  the  taxes  collected  locally.  In  unorganized  counties 
the  taxes  are  collected  by  the  State  Auditor  for  State  use  only. 

Ohio. — Express  companies  are  taxed  by  the  State  upon  their  gross  receipts 
from  intra-state  business  at  the  rate  of  2%.  In  addition  to  this  they  are  taxed 
upon  the  market  value  of  their  capital  stock  (less  real  estate  locally  taxed)  as 
determined  by  the  State  Tax  Commission,  and  upon  all  real  estate  as  assessed 
by  local  officers.  The  valuation  of  the  stock  is  apportioned  to  the  counties  and 
the  taxes  upon  it,  as  well  as  those  upon  real  estate,  are  collected  in  the  same 
way  and  at  the  same  rate  as  those  upon  property  in  the  hands  of  individuals. 

Oklahoma. — Express  companies  are  taxed  upon  all  their  property  under 
the  general  property  tax,  the  assessments  being  made  by  either  State  or  local 
officers.  Intra-state  companies  are  taxed  in  addition  to  this  3%  upon  their 
gross  receipts  from  operation. 

Oregon. — Express  companies  are  taxed  under  the  general  property  tax 
Upon  all  their  property  as  assessed  by  the  State  Board,  the  valuation  being 
apportioned  to  the  counties  and  the  taxes  collected  in  the  same  way  as  those 
upon  property  in  the  hands  of  individuals. 

Pennsylvania. — Express  companies  are  taxed  by  the  State  as  follows: 
5  mills  on  each  $1  actual  value  of  capital  stock;  8  mills  on  each  $1  of  gross 
receipts  from  traffic  wholly  within  the  State;  4  mills  on  each  $1  of  bonds  owned 
within  the  State.  In  addition  to  these  State  taxes,  real  and  personal  property 
necessary  to  the  business  is  taxed  locally  under  the  general  property  tax  in 
Pittsburgh  and  Philadelphia,  but  such  property  is  exempt  elsewhere. 

Rhode  Island. — Express  companies  are  taxed  by  the  State  upon  their 
gross  receipts  from  operation  within  the  State  at  the  rate  of  3%  in  lieu  of  all 
other  taxes  on  intangible  personal  property  or  corporate  excess  and  in  lieu  of 
all  other  taxation  on  personal  property  used  in  the  business.  Real  estate  is 
taxed  as  that  of  individuals. 

South  Carolina. — Express  companies  are  taxed  by  the  State  upon  their 
gross  receipts  from  business  within  the  State  at  the  rate  of  3  mills.  In  addition 
to  this  they  are  assessed  by  the  State  Board  of  Assessors  upon  the  market  value 
of  their  capital  stock  plus  mortgages,  this  valuation  being  apportioned  to  the 
counties  and  taxing  districts,  where  the  taxes  are  collected  at  the  same  rate 
and  in  the  same  way  as  those  upon  property  in  the  hands  of  individuals. 


212  Report  of  Nebraska  Tax  Commission 

South  Dakota. — Express  companies  are  taxed  upon  all  their  property 
at  the  rate  of  the  general  property  tax  as  assessed  by  the  State  board  in  lieu 
of  all  other  taxes  upon  the  property  of  such  companies,  the  tax  being  paid  to 
the  State  treasurer,  and  distributed  to  the  counties  upon  the  basis  of  the 
property  of  such  companies  situated  therein.  Shares  of  stock  are  taxed  to  the 
holders. 

Tennessee. — Express  companies  are  taxed  under  the  general  property 
tax  upon  all  property,  which  property  shall  not  be  assessed  at  less  than  the 
cash  value  of  both  shares  of  stock  and  bonded  debt.  In  addition  such  companies, 
are  subject  to  a  State  license  tax  of  $1,000  if  the  lines  are  less  than  100  miles 
in  length  and  $2,500  if  the  lines  are  more  than  100  miles. 

Texas. — Express  companies  are  taxed  by  the  State  upon  their  gross 
receipts  at  the  rate  of  2£%,  and  are  also  subject  to  a  franchise  tax  upon  the 
amount  of  capital  stock,  surplus  and  undivided  profits,  the  rates  of  which  tax 
are  50  cents  on  each  $1,000  up  to  $1,000,000  and  25  cents  on  each  $1,000  in 
excess  of  $1,000,000  for  domestic  companies;  foreign  companies  pay  $1  on 
each  $1,000  up  to  $100,000  and  $2  on  each  $5,000  in  excess  of  $100,000  and 
$2  on  each  $20,000  in  excess  of  $1,000,000.  In  addition  to  these  taxes  such 
companies  are  assessed  locally  upon  all  their  property  under  the  general  prop- 
erty tax. 

Utah. — Express  companies  are  taxed  upon  all  their  property,  including 
franchises,  under  the  general  property  tax,  the  assessment  being  made  by  the 
State  Board  and  the  valuation  apportioned  to  the  taxing  units  where  the  taxes 
are  collected  in  the  same  way  as  those  upon  property  in  the  hands  of  individuals. 
In  addition  to  this  tax,  such  companies  are  subject  to  a  State  license  tax  based 
upon  the  authorized  amount  of  capital  stock,  the  fees  varying  from  $5  to  $50. 
The  property  of  express  companies  operating  in  only  one  county  is  assessed 
and  taxed  locally  as  property  of  individuals  is  taxed. 

Vermont. — Express  companies  are  taxed  by  the  State  at  the  rate  of  $8 
per  mile  of  lines  over  which  matter  was  transported.  They  are  exempt  from 
local  taxation  upon  property  used  in  the  business.  Shares  of  stock  in  such 
companies  are  assessed  and  taxed  to  the  holders.  Express  companies  are  also 
subject  to  the  State  license  tax  upon  capital  stock,  the  fees  varying  from  $10 
to  $50. 

Virginia.— Express  companies  are  subject  to  the  State  property  tax  upon 
all  property  as  assessed  by  the  State  Corporation  Commission,  the  rate  being 
35  cents  on  $100.  In  addition  to  this  such  companies  are  taxed  by  the  State 
$6  per  mile  of  route  within  the  State.  Local  property  and  license  taxes  are 
allowed.  Shares  of  stock  are  taxed  to  the  holders. 

Washington. — All  tangible  property  of  express  companies  is  assessed 
and  taxed  as  property  in  the  hands  of  individuals.  In  addition  to  these  ad 
valorem  taxes  express  companies  are  taxed  by  the  State  upon  their  gross 
receipts  within  the  State  at  the  rate  of  5%. 

West  Virginia.— All  express  companies  are  taxed  upon  all  their  property 
under  the  general  property  tax,  the  assessment  being  made  by  the  State  Auditor 


Appendix  A — Telephone  Companies  213 

and  the  valuation  apportioned  to  the  taxing  districts.  In  addition  to  this  tax 
all  companies  pay  a  license  fee  of  $1.50  per  mile  of  route  within  the  State,  and 
domestic  companies  also  pay  a  franchise  tax  upon  the  amount  of  authorized 
capital  stock,  the  fees  varying  from  $10  if  the  stock  is  $5,000  or  less  to  $170  if 
the  stock  is  $1,000,000  with  an  additional  fee  of  $60  on  each  million  dollars 
or  fraction  thereof  in  excess  of  one  million.  • 

Wisconsin. — Express  companies  are  taxed  upon  all  their  property,  in- 
cluding franchises,  by  the  State  at  the  rate  of  the  general  property  tax  as 
determined  by  the  State  Tax  Commission. 

Wyoming. — Express  companies  are  taxed  by  the  State  5%  upon  gross 
receipts  in  lieu  of  all  other  taxes.  One-half  of  this  tax  is  retained  by  the  State 
for  State  use  and  the  other  half  apportions  1  tD  the  cDunties  upon  the  basis  of 
mileage. 

III.  TELEPHONE  COMPANIES 

Alabama. — The  State  Board  of  Assessment  values  all  the  property  of 
telephone  companies,  and  this  valuation  is  apportioned  among  the  counties 
and  municipalities  on  the  basis  of  mileage.  Taxes  are  then  collected  on  this 
valuation  at  the  same  rate  and  in  the  same  manner  as  those  imposed  on  prop- 
erty in  the  hands  of  individuals. 

In  addition  to  the  property  tax  as  described  above,  telephone  companies 
doing  a  long  distance  business  are  subject  to  a  State  privilege  tax  at  the  follow- 
ing rates:  Companies  whose  lines  do  not  exceed  150  miles  in  length  within  the 
State,  a  tax  of  $1.00  per  mile;  companies  whose  lines  are  over  150  miles  in 
length  within  the  State,  $1.00  per  mile  of  wire  and  also  a  fee  of  $500.  There 
is  also  a  tax  called  franchise  tax  based  upon  stock,  bonds  and  earnings,  the 
rate  being  that  of  the  general  property  tax. 

Arizona. — Telephone  companies  are  taxed  under  the  general  property 
tax,  the  assessment  being  made  by  the  State  Board  of  Equalization  and  the 
valuation  apportioned  to  the  counties  and  taxing  units,  where  the  taxes  are 
collected  in  the  same  way  and  at  the  same  rate  as  those  upon  property  in  the 
hands  of  individuals. 

Arkansas. — Telephone  companies  are  subject  to  a  State  franchise  tax 
of  1-20  of  1  %  upon  the  amount  of  capital  stock  in  addition  to  an  ad  valorem 
tax  on  the  market  value  of  the  stocks  and  bonds  as  assessed  by  the  State  Com- 
mission. The  portion  of  the  valuation  representing  pole  mileage  is  appor- 
tioned to  the  local  taxing  units  where  the  taxes  are  collected  at  the  rate  of  the 
general  property  tax.  The  valuation  representing  the  value  of  stations  is 
apportioned  to  the  taxing  units  in  which  the  stations  are  located  and  there 
taxed  at  the  rate  of  the  general  property  tax. 

California. — Telephone  companies  are  taxed  by  the  State  upon  their 
gross  receipts  from  operation  at  the  rate  of  3|%  in  lieu  of  all  other  taxes.  The 
gross  receipts  of  companies  doing  an  interstate  business  are  deemed  to  be  all 
receipts  on  business  beginning  and  ending  within  the  State  and  a  proportion, 
based  upon  mileage,  of  the  receipts  from. business  passing  through,  into,  or 
out  of  the  State. 


214  Report  of  Nebraska  Tax  Commission 

Colorado. — The  total  property  of  telephone  companies  is  assessed  by  the 
State  Tax  Commission  and  the  valuation  apportioned  to  the  counties  and  tax- 
ing districts  upon  the  basis  of  mileage,  the  taxes  being  collected  locally  at  the 
same  rate  and  in  the  same  way  as  those  upon  property  in  the  hands  of  in- 
dividuals. Such  companies  also  pay  a  State  license  tax  of  2  cents  on  each 
$1^)00  of  authorized  capital  stock. 

Delaware. — Telephone  companies  are  subject  to  a  State  tax  of  60  cents 
per  mile  for  the  longest  wire  in  the  State,  30  cents  per  mile  for  the  next  longest, 
and  20  cents  per  mile  for  every  other  wire,  and  25  cents  on  each  transmitter. 
In  addition  to  these  State  taxes,  such  companies  are  subject  to  the  general 
property  tax  assessed  and  collected  locally. 

District  of  Columbia. — Telephone  companies  are  taxed  by  the  District 
at  the  rate  of  4  %  upon  their  gross  earnings  within  the  District  and  in  addition 
to  this  they  are  taxed  on  their  realty,  including  overhead  wires  and  supporting 
poles,  under  the  general  property  tax. 

Florida. — Telephone  companies  are  subject  to  taxation  under  the  general 
property  tax  upon  all  assets.  In  addition  to  this,  systems  having  100  or  more 
instruments  operating  in  the  State  pay  a  State  license  tax  of  12  £  cents  on  each 
intrument,  provided  that  in  no  case  shall  the  total  tax  exceed  $200,  and  pro- 
vided that  in  towns  of  less  than  2,000  inhabitants  such  license  tax  shall  not  exceed 
$15.  Shares  of  stock  are  taxable  to  the  holder. 

Georgia. — Telephone  companies  are  assessed  by  the  State  Comptroller 
upon  the  total  amount  of  their  property,  including  indebtedness  and  franchises; 
this  valuation  is  apportioned  to  the  local  taxing  units  and  the  tax  collected  in 
the  same  way  and  at  the  same  rate  as  that  upon  property  in  the  hands  of  in- 
dividuals. Such  companies  are  also  subject  to  a  State  license  tax  upon  the 
authorized  amount  of  capital  stock,  the  fees  varying  from  $5  to  $75. 

Idaho.— Telephone  companies  are  assessed  by  the  State  Board  of  Equal- 
ization upon  all  their  property,  this  valuation  being  apportioned  to  the  counties 
upon  the  basis  of  mileage,  and  the  taxes  collected  at  the  same  rate  and  in  the 
same  way  as  those  upon  property  in  the  hands  of  individuals.  In  addition  to 
this,  there  is  a  State  license  tax  upon  the  authorized  amount  of  capital  stock, 
the  fees  varying  from  $10  to  $150  according  to  the  amount  of  stock. 

Illinois. — Domestic  telephone  companies  are  assessed  by  the  State  Board 
of  Equalization  upon  the  market  value  of  their  stocks  and  bonds,  including  the 
value  of  the  franchise,  deducting  from  this  valuation  the  assessed  value  of  a 
tangible  property.  The  remainder  is  taxed  at  the  rate  of  the  general  property 
tax  at  the  principal  office  of  the  company.  Real  and  personal  property  is 
assessed  and  taxed  locally  under  the  general  property  tax. 

Foreign  companies  are  assessed  and  taxed  upon  tangible  property  only, 
in  the  same  way  as  domestic  companies.  Shares  of  stock  of  foreign  companies 
are  taxed  to  the  holders. 

Indiana. — Telephone  companies  are  assessed  by  the  State  Tax  Commis- 
sioners upon  the  market  value  of  their  stocks  and  bonds  as  representing  the 
value  of  the  entire  property  of  the  companies.  This  valuation  is  apportioned 


Appendix  A — Telephone  Companies  215 

to  the  counties  and  townships  and  the  taxes  collected  at  the  same  rate  and  in 
the  same  manner  as  those  imposed  upon  property  in  the  hands  of  individuals. 
In  addition  to  this  tax  all  real  estate  of  such  companies  is  taxed  by  the  local 
taxing  units  in  the  same  way  as  property  of  individuals  is  taxed. 

Iowa. — Telephone  companies  are  assessed  by  the  State  Council  upon  all 
property,  including  franchise,  and  this  valuation  is  apportioned  to  the  counties 
upon  the  basis  of  mileage,  the  taxes  being  collected  at  the  same  rate  and  in 
the  same  manner  as  those  upon  the  property  of  individuals. 

Kansas. — All  property  of  interstate  and  intercounty  telephone  com- 
panies is  assessed  by  the  State  Tax  Commission  and  this  valuation  apportioned 
to  the  taxing  districts  upon  the  basis  of  mileage,  the  taxes  being  collected  locally 
at  the  rate  of  the  general  property  tax.  Telephone  companies  doing  business  in 
ony  one  county  are  assessed  and  taxed  upon  their  property  exactly  as  the 
property  of  individuals  is  taxed.  Municipal  license  taxes  upon  all  companies 
are  allowed.  Shares  of  stock  of  foreign  companies  having  their  principal  office 
outside  the  State  are  taxed  to  the  holders. 

Kentucky. — Telephone  companies  are  assessed  by  a  State  board  upon 
the  value  of  the  franchise,  which  value  is  determined  by  subtracting  from  the 
value  of  the  capital  stock  the  value  of  all  tangible  property  otherwise  assessed. 
This  franchise  valuation  is  apportioned  to  the  taxing  districts  where  the 
franchise  is  exercised  and  there  taxed  at  the  same  rate  as  the  property  of  in- 
dividuals. All  tangible  property  is  assessed  and  taxed  by  local  officers  under 
the  general  property  tax.  Domestic  companies  doing  business  entirely  with- 
out the  State  pay  a  State  tax  of  1%  upon  the  authorized  amount  of  capital 
stock  in  lieu  of  all  other  taxes  within  the  State.  Shares  of  foreign  companies 
not  owning  property  within  the  State  are  taxed  to  the  holders. 

Louisiana. — The  entire  property  of  telephone  companies,  including 
franchises,  is  valued  by  the  State  Board  of  Appraisers  and  this  valuation 
apportioned  to  the  parishes  and  municipalities  where  the  taxes  are  collected  at 
the  same  rate  as  those  upon  property  in  the  hands  of  individuals.  Foreign 
companies  are  also  subject  to  a  license  tax  of  $5  on  each  $1,000  of  gross  earn- 
ings within  the  State.  Domestic  companies  pay  license  taxes  based  upon  gross 
receipts  within  the  State,  the  fees  varying  from  $20  to  $6,250,  according  to  the 
amount  of  receipts. 

Maine. — Telephone  companies  are  taxed  by  the  State  upon  their  gross 
receipts  from  business  wholly  within  the  State,  the  rates  varying  from  1J%  to 
6%  according  to  the  amount  of  the  receipts.  This  tax  is  apportioned  to  the 
cities  and  towns  in  which  owners  of  stock  reside  as  follows:  1%  of  the  value 
of  stock  owned  in  cities  and  towns,  with  provision  that  the  amount  appor- 
tioned shall  not  be  a  greater  part  of  the  whole  tax  received  than  the  proportion 
which  stock  owned  within  the  State  bears  to  the  total  amount  of  stock,  and 
provided  that  the  amount  so  apportioned  shall  not  exceed  the  total  amount 
received  from  the  tax  upon  the  receipts.  The  remainder  of  the  tax  is  retained 
by  the  State. 

Maryland.— Telephone  companies  are  taxed  by  the  State  upon  their 
jross  receipts  within  the  State  at  the  rate  of  2%;  the  capital  stock  is  aswssed 


216  Report  of  Nebraska  Tax  Commission 

by  the  State  Tax  Commissioner  and  the  valuation  apportioned  to  the  counties 
where  the  holders  reside  and  there  taxed  in  the  name  of  the  holders,  the  cor- 
poration paying  the  tax,  which  is  at  the  rate  of  the  general  property  tax.  All 
real  estate  is  taxed  as  that  of  individuals. 

Massachusetts.— Telephone  companies  are  taxed  by  the  State  upon  the 
margin  of  intangible  value  found  by  deducting  the  assessed  value  of  certain 
tangible  property,  which  is  taxed  to  the  corporation  by  local  units,  from  the 
cash  value  of  so  much  of  the  capital  stock  as  is  proportioned  to  that  part  of 
i:s  line  within  the  State,  determined  on  the  basis  of  the  number  of  instruments 
within  and  without  the  State.  This  tax  upon  corporate  excess  is  at  a  rate  equal 
to  the  average  of  the  rates  of  the  general  property  tax  for  the  three  preceding 
years.  Works,  structures,  real  estate,  machinery,  conduits,  wires  and  pipes 
are  assessed  and  taxed  locally  as  property  of  individuals  is  taxed. 

Michigan. — Telephone  companies  whose  receipts  are  less  than  $500  are 
exempt.  If  the  gross  receipts  within  the  State  exceed  $500,  the  property  of 
telephone  companies  is  assessed  by  the  State  board  and  taxed  at  the  rate  of 
the  general  property  tax. 

Minnesota. — Telephone  companies  are  taxed  by  the  State  upon  their 
gross  earnings  from  operation  at  the  rate  of  3%  in  lieu  of  all  other  taxes.  The 
gross  earnings  of  companies  doing  an  interstate  business  include  a  propor- 
tionate share,  based  upon  mileage,  of  the  interstate  gross  receipts  from  opera- 
tion. 

Mississippi. — Telephone  companies  are  subject  to  taxation  upon  all  their 
property  as  assessed  by  the  State  Board  of  Assessors,  the  valuation  being 
apportioned  to  the  taxing  districts  and  taxed  at  the  rate  of  the  general  property 
tax.  They  are  also  subject  to  various  privilege  taxes,  those  upon  exchanges 
varying  from  $2.50  to  $100  according  to  the  number  of  subscribers,  and  those 
upon  long  distance  companies  operating  less  than  1,000  miles  pole  line,  from 
5  cents  to  25  cents  per  mile  of  pole  line,  according  to  the  number  of  miles  of 
such  line.  Long  distance  companies  operating  1,000  miles  or  more  of  line  pay 
a  tax  of  $250.  Municipal  privilege  taxes  are  allowed  upon  exchanges  only. 

Missouri. — Telephone  companies  are  taxed  upon  all  their  property,  in- 
cluding the  franchises,  at  the  rate  of  the  general  property  tax,  the  assessment 
being  made  by  the  State  board  and  the  valuation  apportioned  to  the  counties 
and  taxing  districts  where  the  tax  is  collected  in  the  same  manner  as  that  upon 
the  property  of  natural  persons.  Local  property  is  assessed  by  local  officers. 
Shares  in  foreign  companies  are  taxed  to  the  holders  at  market  value. 

Montana — The  property  of  telephone  companies  is  assessed  and  taxed 
exactly  like  property  in  the  hands  of  individuals.  The  capital  stock  and 
franchises  are  assessed  at  the  principal  office  of  the  company  and  other  property 
where  it  is  situated.  In  addition  to  this  ad  valorem  tax  telephone  companies 
are  subject  to  county  license  fees,  based  upon  population  and  varying  from 
$100  to  $400  a  year. 

Nebraska. — Telephone  companies  are  taxed  locally  under  the  general 
property  tax  upon  all  property  and  franchises.  They  are  also  subject  to  the 


Appendix  A — Telephone  Companies  217 

State  tax  upon  the  authorized  amount  of  capital  stock,  the  fees  varying  from 
$5  to  $2,500. 

Nevada. — Telephone  companies  are  taxed  upon  all  their  property  under 
the  general  property  tax,  the  assessment  being  made  by  the  State  Board  and 
the  valuation  apportioned  to  the  taxing  districts  where  the  taxes  are  collected. 
Foreign  companies  are  subject  to  retaliatory  provisions. 

New  Hampshire. — Telephone  companies  are  taxed  upon  all  their  prop- 
erty, including  franchises,  by  the  State,  the  assessment  being  made  by  the 
State  Tax  Commission  and  the  rate  of  taxation  being  fixed  by  such  Com- 
mission at  a  rate  as  nearly  as  possible  equal  to  that  of  the  general  property  tax. 

New  Jersey. — Telephone  companies  are  taxed  by  the  State  upon  their 
gross  receipts  from  business  done  within  the  State  and  a  proportionate  share 
of  interstate  earnings  at  the  rate  of  2%.  In  addition  to  this  tax  all  tangible 
property  is  assessed  and  taxed  as  the  property  of  individuals. 

New  Mexico. — Telephone  companies  are  assessed  and  taxed  upon  all 
their  property  as  valued  by  the  State  Board  of  Equalization,  the  valuation 
being  apportioned  to  the  counties  and  municipalities  and  the  taxes  collected  in 
the  same  way  and  at  the  same  rate  as  those  property  in  the  hands  of  individuals. 

New  York. — Telephone  companies  are  subject  to  a  State  tax  upon  gross 
earnings  from  business  wholly  within  the  State  at  the  rate  of  ^  of  1  %,  and  to 
a  State  franchise  tax  upon  capital  stock,  the  rates  varying  from  £  of  a  mill  per 
$1  for  each  1%  of  dividends  declared  to  1^  mills  on  each  $1  of  capital  stock 
employed  in  the  State,  according  to  the  amount  of  dividends  declared.  In 
addition  to  these  taxes,  telephone  companies  are  assessed  and  taxed  upon  all 
tangible  property  in  the  same  way  as  the  property  of  individuals  is  taxe:1,  this 
tax  being  for  local  use  only.  Foreign  companies  also  pay  an  additional  State 
license  fee  of  J  of  1  %  upon  the  capital  stock  employed  in  the  State. 

North  Carolina. — Telephone  companies  are  assessed  by  the  State  Tax 
Commission  upon  all  their  property,  including  franchises  and  mortgages  upon 
such  property,  the  valuation  being  apportioned  to  the  counties  and  taxing 
districts  where  the  taxes  are  levied  at  the  rate  of  the  general  property  tax.  In 
addition  to  the  ad  valorem  taxes,  such  companies  are  taxed  ty  the  State  upon 
their  gross  receipts  from  business  within  the  State  and  a  share  of  interstate 
earnings  at  the  rate  of  2£%. 

North  Dakota. — Telephone  companies  are  taxed  upon  all  their  property 
under  the  general  property  tax,  the  assessment  of  real  estate  being  made  by 
local  officers  and  that  of  franchise,  poles,  and  wire  by  the  State  Board  of 
Equalization.  The  valuation  made  by  the  State  Board  is  apportioned  to  the 
counties  upon  the  basis  of  mileage,  and  the  taxes  collected  locally.  In  un- 
organized counties  the  taxes  are  collected  by  the  State  Auditor  for  State  use 
only. 

Ohio.— Telephone  companies  are  subject  to  a  State  excise  tax  based  upon 
gross  receipts  from  intra-state  business  at  the  rate  of  1.2%.  In  addition  to 
this  they  are  taxed  upon  the  market  value  of  their  capital  stock  (less  real  estate 
locally  taxed)  as  determined  by  the  State  Tax  Commission,  and  upon  all  real 


218  Report  of  Nebraska  Tax  Commission 

estate  as  assessed  by  local  officers.  The  valuation  of  the  stock  is  apportioned 
to  the  counties  and  the  taxes  upon  it,  as  well  as  those  upon  real  estate,  are 
collected  in  the  same  way,  at  the  same  rate,  and  for  the  same  purposes  as  those 
upon  property  in  the  hands  of  individuals. 

Oklahoma. — Telephone  companies  are  taxed  upon  all  their  property 
under  the  general  property  tax,  the  assessments  being  made  by  either  State 
or  local  officers.  Intra-state  companies  are  taxed  in  addition  to  this  \  of  1  % 
upon  their  gross  receipts  from  operation. 

Oregon. — Telephone  companies  are  taxed  under  the  general  property 
tax  upon  all  their  property  as  assessed  by  the  State  Board,  the  valuations  being 
apportioned  to  the  counties  and  the  taxes  collected  in  the  same  way  as  those 
upon  property  in  the  hands  of  individuals. 

Pennsylvania. — Telephone  companies  are  taxed  by  the  State  as  follows: 
5  mills  on  each  $1  actual  value  of  capital  stock;  8  mills  on  each  $1  of  gross 
receipts  from  traffic  wholly  within  the  State;  4  mills  on  each  $1  of  bonds  owned 
within  the  State.  In  addition  to  these  State  taxes,  real  and  personal  property 
necessary  to  the  business  is  taxed  locally  under  the  general  property  tax  in 
Pittsburgh  and  Philadelphia,  but  such  property  is  exempt  elsewhere. 

Rhode  Island. — Telephone  companies  are  taxed  by  the  State  upon  their 
gross  receipts  from  operation  within  the  State  at  the  rate  of  2%  in  lieu  of  all 
other  taxes  on  intangible  personal  property  or  corporate  excess  and  in  lieu  of 
all  other  taxation  on  personal  property  used  in  the  business.  Real  estate  is 

taxed  as  that  of  indviduals. 

» 

South  Carolina. — Telephone  companies  are  taxed  by  the  State  upon 
their  gross  receipts  from  business  within  the  State  at  the  rate  of  3  mills.  In 
addition  to  this  they  are  assessed  by  the  State  Board  of  Assessors  upon  the 
market  value  of  their  capital  stock  plus  mortgages,  this  valuation  being  appor- 
tioned to  the  counties  and  taxing  districts  where  the  taxes  upon  it  are  collected 
at  the  same  rate  and  in  the  same  way  as  those  upon  property  in  the  hands  of 
individuals. 

South  Dakota. — Telephone  companies  are  taxed  upon  all  their  property, 
including  franchises,  as  assessed  by  the  State  board,  the  valuation  being 
apportioned  to  the  various  taxing  districts  and  the  taxes  collected  at  the  same 
rate  and  in  the  same  manner  as  those  upon  property  in  the  hands  of  individuals. 
Shares  of  stock  are  taxed  to  the  holders. 

Tennessee. — Telephone  companies  are  assessed  and  taxed  upon  all  their 
property  under  the  general  property  tax;  property  having  an  actual  situs  is 
assessed  by  local  officers,  all  other  property  by  the  State  Tax  Commissioners. 
The  valuation  made  by  the  State  Commissioners  is  apportioned  to  the  counties 
and  taxing  districts  and  the  taxes  upon  it,  as  well  as  those  upon  local  property, 
collected  in  the  same  way  as  those  upon  property  of  individuals.  In  addition 
to  these  taxes.,  telephone  companies  are  subject  to  State  license  taxes  varying 
from  20  cents  to  50  cents  upon  each  instrument,  according  to  population. 
Mutual  companies  not  run  for  profit  are  exempt  from  this  license  tax. 


Appendix  A — Telephone  Companies  219 

Texas. — Telephone  companies  are  taxed  by  the  State  upon  their  gross 
receipts  from  business  within  the  State  at  the  rate  of  1|%,  and  are  also  subject 
to  a  franchise  tax  upon  the  amount  of  capital  stock,  surplus  and  undivided 
profits,  the  rates  of  which  tax  are  50  cents  on  each  $1,000  up  to  $1,000,000 
and  25  cents  upon  each  $1,000  in  excess  of  $1,000,000  for  domestic  corporations; 
foreign  companies  pay  $1  on  each  $1,000  up  to  $100,000  and  $2  on  each  $5,000 
above  $100,000  up  to  $1,000,000  and  $2  on  each  $20,000  in  excess  thereof.  In 
addition  to  these  taxes  such  companies  are  assessed  locally  upon  all  their 
property  under  the  general  property  tax. 

Utah. — Telephone  companies  are  taxed  upon  all  their  property,  including 
franchises,  under  the  general  property  tax,  the  assessment  being  made  by  the 
State  Board  and  the  valuation  apportioned  to  the  taxing  units,  where  the  taxes 
are  collected  in  the  same  way  as  those  upon  property  of  individuals.  In  addi- 
tion to  these  taxes  such  companies  pay  a  State  license  tax  based  upon  the 
authorized  amount  of  capital  stock,  the  fees  varying  from  $5  to  $50.  Property 
of  telephone  companies  operating  in  only  one  county  is  assessed  and  taxed 
locally  as  property  of  individuals  is  taxed. 

Vermont. — Telephone  companies  are  taxed  by  the  State  upon  their 
gross  receipts  collected  within  the  State  at  the  rate  of  3%  or,  in  lieu  thereof, 
40  cents  upon  each  transmitter  and  30  cents  upon  each  mile  of  telephone  wire 
in  use  in  the  State.  Such  companies  are  exempt  from  all  local  taxation  on  prop- 
erty used  in  the  business.  Telephone  companies  are  also  subject  to  the  State 
license  tax  upon  capital  stock,  the  fees  varying  from  $10  to  $50. 

Virginia. — Telephone  companies  are  subject  to  the  State  property  tax 
upon  all  property,  the  assessment  being  made  by  the  State  Corporation  Com- 
mission and  the  rate  of  taxation  being  35  cents  on  $100.  Tangible  property 
is  taxed  locally  under  the  general  property  tax.  In  addition  to  these  ad  valorem 
taxes  such  companies  are  taxed  by  the  State  upon  their  gross  earnings  within 
the  State  as  follows:  if  the  gross  earnings  do  not  exceed  $50,000  in  cases  where 
the  pole  mileage  is  not  greater  than  400  miles  and  where  the  company  is  not 
owned  or  controlled  by  a  company  whose  receipts  are  in  excess  of  $50,000  per 
annum,  the  tax  upon  gross  earnings  is  at  the  rate  of  1%;  if  any  one  of  the 
above  conditions  is  not  fulfilled,  the  tax  is  $2  per  mile  of  poles  and  1  %  on  the 
gross  earnings  up  to  $50,000  and  2%  on  earnings  in  excess  thereof.  Local 
license  taxes  are  also  allowed.  Mutual  telephone  companies  are  subject  to  the 
property  taxes  only.  Shares  of  foreign  companies  are  taxed  to  the  holders. 

Washington. — All  the  property,  real  and  personal,  of  telephone  com- 
panies is  assessed  and  taxed  in  the  same  way  as  property  in  the  hands  of  in- 
dividuals. 

West  Virginia. — All  telephone  companies  are  taxed  upon  all  their  property 
as  assessed  by  the  State  board,  the  rate  of  taxation  being  that  of  the  general 
property  tax.  In  addition  to  the  above  ad  valorem  tax  all  domestic  companies 
pay  a  State  license  tax  upon  the  authorized  amount  of  capital  stock,  the  fees 
varying  from  $10  if  the  capital  stock  is  $5,000  or  less  to  $170  if  the  stock  is 
$1,000,000  with  an  additional  fee  of  $60  on  each  million  dollars  or  fraction 


220  Report  of  Nebraska  Tax  Commission 

thereof  in  excess  of  one  million.  Foreign  companies  pay  a  State  license  tax  of 
$1.00  per  mile  of  wire  between  cities  and  towns  (one  line  of  wire  counted),  but 
not  in  local  exchanges,  the  minimum  tax  being  $100.00. 

Wisconsin. — Telephone  companies  are  taxed  by  the  State  upon  their 
gross  receipts  from  both  exchange  and  toll-line  service  wholly  within  the  State 
and  upon  a  proportionate  amount,  basai  upon  mileage,  of  the  receipts  from 
interstate  toll-line  service  at  the  following  rates:  5%  if  such  receipts  equal 
or  exceed  $500,000.00;  4%  if  from  $300,000.00  to  $500,000.00;  3%  if  from 
$100,000.00  to  $300,000.00;  and  2^%  if  below  $100,000.00.  All  receipts  from 
toll-line  business  and  15%  of  exchange  receipts  are  retained  by  the  State  for 
State  use;  85%  of  exchange  receipts  are  distributed  to  the  taxing  districts  in 
which  the  exchanges  are  located. 

Wyoming. — All  property  of  telephone  companies  is  assessed  by  the  State 
board  and  the  valuation  apportioned  to  the  various  taxing  districts,  where  the 
taxes  are  collected  at  the  same  rate  and  in  the  same  way  as  those  upon  property 
in  the  hands  of  individuals.  Local  assessment  and  taxation  by  incorporated 
towns,  villages,  and  cities  is  allowed. 

IV.  TELEGRAPH  COMPANIES 

Alabama. — The  State  Board  of  Assessment  values  all  the  property  of 
telegraph  companies  and  this  valuation  is  apportioned  among  the  counties 
and  municipalities  on  the  basis  of  mileage.  The  taxes  are  collected  on  this 
valuation  at  the  same  rate  and  in  the  same  manner  as  those  on  property  in  the 
hands  of  individuals.  In  addition  to  the  property  tax  as  described  above, 
telegraph  companies  doing  a  long  distance  business  are  subject  to  a  State 
privilege  tax  at  the  following  rates:  companies  whose  lines  do  not  exceed  150 
miles  in  length  within  the  State,  a  tax  of  $1.00  per  mile;  companies  whose 
lines  are  over  150  miles  in  length  within  the  State,  $1.00  per  mile  and  also  a  fee 
of  $500.  There  is  also  a  tax  called  "franchise  tax"  based  upon  stock,  bonds  and 
earnings,  the  rate  being  that  of  the  general  property  tax. 

Arizona. — Telegraph  companies  are  taxed  under  the  general  property 
tax,  the  assessment  being  made  by  the  State  Board  of  Equalization  and  the 
valuation  apportioned  to  the  counties  and  taxing  units,  where  the  taxes  are 
collected  in  the  same  way  and  at  the  same  rate  as  those  upon  property  in  the 
hands  of  individuals. 

Arkansas. — Telegraph  companies  are  taxed  by  the  State  1-20  of  1% 
upon  the  amount  of  capital  stock  and  also  upon  the  market  value  of  the  stocks 
and  bonds  as  assessed  by  the  State  Commission.  The  valuation  of  the  Com- 
mission is  apportioned  to  the  taxing  units  on  the  basis  of  mileage  and  the  taxes 
collected  at  the  rate  of  the  general  property  tax. 

California. — Telegraph  companies  are  taxed  by  the  State  upon  their 
gross  receipts  from  operation  at  the  rate  of  3£%  (now  increased)  in  lieu  of  all 
other  taxes.  The  gross  receipts  of  companies  doing  an  interstate  business  are 
deemed  to  be  all  receipts  on  business  beginning  and  ending  within  the  State 
and  a  proportion,  based  upon  mileage,  of  the  receipts  from  business  passing 
through,  into,  or  out  of  the  State. 


Appendix  A — Telegraph  Companies  221 

Colorado. — The  total  property  of  telegraph  companies  is  assessed  by 
the  State  Tax  Commission  and  the  valuation  apportioned  to  the  counties  and 
taxing  districts  upon  the  basis  of  mileage,  the  taxes  being  collected  locally  at 
the  same  rate  and  in  the  same  way  as  those  upon  property  in  the  hands  of 
individuals.  Such  companies  also  pay  a  State  license  tax  of  2  cents  on  each 
$1,000  of  authorized  capital  stock. 

Delaware. — Telegraph  companies  are  subject  to  a  State  tax  of  60  cents 
per  mile  for  the  longest  wire  in  the  State,  30  cents  per  mile  for  the  next  longest 
and  20  cents  per  mile  for  every  other  wire.  In  addition  to  these  taxes,  such 
companies  are  subject  to  the  general  property  tax  assessed  and  collected  locally. 

District  of  Columbia. — Telegraph  companies  are  taxed  by  the  District 
upon  all  their  property  under  the  general  property  tax. 

Florida. — Telegraph  companies  are  subject  to  taxation  under  the  general 
property  tax  upon  all  assets.  In  addition  to  this,  such  companies  pay  a  State 
license  tax  of  50  cents  per  mile  of  wire,  one-half  of  which  tax  is  distributed  to 
the  counties  on  the  basis  of  line  mileage,  and  one-half  retained  by  the  State. 
Shares  of  stock  are  taxable  to  the  holders. 

Georgia. — Telegraph  companies  are  assessed  by  the  State  Comptroller 
upon  the  total  amount  of  their  property,  including  indebtedness  and  fran- 
chises; this  valuation  is  apportioned  to  the  local  taxing  units  and  the  tax  col- 
lected in  the  same  way  and  at  the  same  rate  as  that  upon  property  in  the  hands 
of  individuals.  Such  companies  are  also  subject  to  a  State  license  tax  upon 
the  authorized  amount  of  capital  stock,  the  fees  varying  from  $5  to  $75. 

Idaho. — Telegraph  companies  are  assessed  by  the  State  Board  of  Equali- 
zation upon  all  their  property,  this  valuation  being  apportioned  to  the  counties 
upon  the  basis  of  mileage,  and  the  taxes  collected  at  the  same  rate  and  in  the 
same  way  as  those  upon  property  in  the  hands  of  individuals.  In  addition  to 
this,  there  is  a  State  license  tax  upon  the  authorized  amount  of  capital  stock, 
the  fees  varying  from  $10  to  $150  according  to  the  amount  of  stock. 

Illinois.— Domestic  telegraph  companies  are  assessed  by  the  State  Board 
of  Equalization  upon  the  market  value  of  their  stocks  and  bonds,  including  the 
value  of  the  franchise,  deducting  from  this  valuation  the  assessed  value  of  all 
tangible  property.  The  remainder  is  taxed  at  the  rate  of  the  general  property 
tax  at  the  principal  office  of  the  company.  Real  and  personal  property  is  as- 
sessed and  taxed  locally  under  the  general  property  tax. 

Foreign  companies  are  assessed  and  taxed  upon  tangible  property  only, 
in -the  same  way  as  domestic  companies.  Shares  of  stock  of  foreign  companies 
are  taxed  to  the  holders. 

Indiana. — Telegraph  companies  are  assessed  by  the  State  Tax  Com- 
missioners upon  the  market  value  of  their  stocks  and  bonds  as  representing 
the  value  of  the  entire  property  of  the  companies.  This  valuation  is  appor- 
tioned to  the  counties  and  townships  and  the  taxes  collected  at  the  rate  of  the 
general  property  tax.  In  addition  to  this  tax  all  real  estate  of  such  companies 
is -taxed  by  the  local  units  in  the  same  way  as  property  of  individuals  is  taxed. 


222  Report  of  Nebraska  Tax  Commission 

Iowa. — Telegraph  companies  are  assessed  by  the  State  Council  upon  all 
property,  including  franchises,  and  this  valuation  is  apportioned  to  the  counties 
upon  the  basis  of  mileage,  the  taxes  being  collected  at  the  same  rate  and  in  the 
same  way  as  those  upon  the  property  of  individuals. 

Kansas. — All  property  of  telegraph  companies  is  assessed  by  the  State 
Tax  Commission  and  this  valuation  apportioned  to  the  taxing  districts  upon 
the  basis  of  mileage,  the  taxes  being  collected  locally  at  the  rate  of  the  general 
property  tax.  Municipal  license  taxes  are  allowed.  Shares  of  stock  of  foreign 
companies  having  their  principal  office  outside  the  State  are  taxed  to  the 
holders. 

Kentucky. — Telegraph  companies  are  assessed  by  a  State  Board  upon 
the  value  of  the  franchise,  which  value  is  determined  by  subtracting  from  the 
value  of  the  capital  stock  the  value  of  all  tangible  property  otherwise  assessed. 
This  franchise  valuation  is  apportioned  to  the  taxing  districts  where  the  fran- 
chise is  exercised  and  there  taxed  at  the  same  rate  as  property  in  the  hands  of 
individuals.  All  tangible  property  is  assessed  and  taxed  by  local  officers  under 
the  general  property  tax.  Domestic  companies  doing  business  entirely  with- 
out the  State  pay  a  State  tax  of  1%  upon  the  authorized  amount  of  capital 
stock  in  lieu  of  all  other  taxes  within  the  State.  Shares  of  foreign  companies  not 
owning  property  within  the  State  are  taxed  to  the  holders. 

Louisiana. — Telegraph  companies  are  taxed  upon  all  their  property, 
including  franchises,  as  assessed  by  the  State  Board  of  Appraisers,  the  valua- 
tion being  apportioned  to  the  parishes  and  municipalities,  where  the  taxes  are 
collected  at  the  same  rate  as  those  upon  property  in  the  hands  of  individuals. 
Foreign  companies  are  also  subject  to  a  license  tax  of  $3  on  each  $1,000  of 
gross  earnings  within  the  State.  Domestic  companies  pay  license  fees  based 
upon  gross  receipts  within  the  State,  the  amounts  varying  from  $20  to  $6,250 
according  to  the  amount  of  receipts. 

Maine. — Telegraph  companies  are  taxed  upon  their  gross  receipts  from 
business  within  the  State,  the  rate  of  the  tax  varying  from  lj%  to  6%  accord- 
ing to  the  amount  of  receipts.  This  tax  is  apportioned  to  the  cities  and  town 
in  which  owners  of  stock  reside  as  follows:  1%  of  the  value  of  stock  owned  in 
cities  and  towns  with  provision  that  the  amount  apportioned  shall  not  be  a 
greater  part  of  the  whole  tax  received  than  the  proportion  which  stock  owned 
within  the  State  bears  to  the  total  amount  of  stock  and  provided  that  the 
amount  so  apportioned  shall  not  exceed  the  amount  received  from  the  tax 
upon  receipts.  The  remainder  of  the  tax  is  retained  by  the  State. 

Maryland. — Telegraph  companies  are  taxed  by  the  State  upon  their 
gross  receipts  within  the  State  at  the  rate  of  2^%;  the  capital  stock  is  assessed 
by  the  State  Tax  Commissioner  and  the  valuation  apportioned  to  the  counties 
where  the  holders  reside  and  there  taxed  in  the  names  of  the  holders,  the  cor- 
poration paying  the  tax,  which  is  at  the  rate  of  the  general  property  tax.  All 
real  estate  is  taxed  as  that  of  individuals. 

Massachusetts.— Telegraph  companies  are  taxed  by  the  State  upon 
the  margin  of  intangible  value  found  by  deducting  the  assessed  value  of  certain 


Appendix  A — Telegraph  Companies  223 

tangible  property,  which  is  taxed  to  the  corporation  by  local  units,  from  the 
cash  value  of  so  much  of  the  capital  stock  as  is  proportional  to  that  part  of  its 
line  within  the  State,  determined  on  the  basis  of  miles  of  wire  within  and 
without  the  State.  This  tax  upon  corporate  excess  is  at  a  rate  equal  to  the 
average  of  the  rates  of  the  general  property  tax  for  the  three  preceding  years. 
Works,  structures,  real  estate,  machinery,  conduits,  wire  and  pipes  are  as- 
sessed and  taxed  locally  as  property  of  individuals  is  taxed. 

Michigan. — Telegraph  companies  whose  receipts  are  less  than  $500  are 
exempt.  If  the  gross  receipts  within  the  State  exceed  $500,  the  property  of 
such  companies  is  assessed  by  the  State  board  and  taxed  at  the  rate  of  the 
general  property  tax. 

Minnesota. — Telegraph  companies  are  taxed  by  the  State  upon  the  cash 
value  of  all  their  property  at  a  rate  to  be  determined  by  the  State  Board  of 
Equalization,  this  tax  being  in  lieu  of  all  others. 

Mississippi. — Telegraph  companies  are  subject  to  taxation  upon  all 
their  property  as  assessed  by  the  State  Board  of  Assessors,  the  valuation  being 
apportioned  to  the  taxing  districts  and  taxed  at  the  rate  of  the  general  property 
tax.  They  are  also  subject  to  a  State  privilege  tax  based  upon  miles  of  pole 
line,  the  rate  being  25  cents  per  mile,  with  a  maximum  tax  of  $250.00. 

Missouri. — Telegraph  companies  are  taxed  upon  all  their  property,  in- 
cluding franchises,  at  the  rate  of  the  general  property  tax,  the  assessment 
being  made  by  the  State  board  and  the  valuation  apportioned  to  the  taxing 
districts,  where  the  tax  is  collected  as  that  upon  the  property  of  natural  per- 
sons. Local  property  is  assessed  by  local  officers.  Shares  in  foreign  com- 
panies are  taxed  to  the  holders  at  market  value. 

Montana. — The  property  of  telegraph  companies  is  assessed  and  taxed 
exactly  as  property  in  the  hands  of  individuals.  The  capital  stock  and  fran- 
chises are  assessed  at  the  principal  office  of  the  company  and  other  property 
where  situated.  In  addition  to  this  ad  valorem  tax,  such  companies  are  sub- 
ject to  county  license  fees  of  $5  per  quarter  on  each  instrument  in  use. 

Nebraska. — Telegraph  companies  are  taxed  locally  under  the  general 
property  tax  upon  all  property  and  franchises.  They  are  also  subject  to  the 
State  tax  upon  the  authorized  amount  of  capital  stock,  the  fees  varying  from 
$5  to  $2,500. 

Nevada. — Telegraph  companies  are  taxed  upon  all  their  property  under 
the  general  property  tax,  the  assessment  being  made  by  the  State  Board  and 
the  valuation  apportioned  to  the  taxing  districts  where  the  taxes  are  collected. 
Foreign  companies  are  subject  to  retaliatory  provisions. 

New  Hampshire. — Telegraph  companies  are  taxed  upon  all  their  prop- 
erty, including  franchises,  by  the  State,  the  assessment  being  made  by  the 
State  Tax  Commission  and  the  rate  of  taxation  being  fixed  by  such  Com- 
mission at  a  rate  as  nearly  as  possible  equal  to  that  of  the  general  property  tax. 

New  Jersey. — Telegraph  companies  are  taxed  by  the  State  upon  their 
gross  receipts  from  business  done  within  the  State  and  a  proportionate  share 


224  Report  of  Nebraska  Tax  Commission 

of  interstate  earnings  at  the  rate  of  2%.    In  addition  to  this  tax  all  tangible 
property  is  assessed  and  taxed  as  the  property  of  individuals. 

New  Mexico. — Telegraph  companies  are  assessed  and  taxed  upon  an 
their  property  as  valued  by  the  State  Board  of  Equalization,  the  valuation 
being  apportioned  to  the  counties  and  municipalities  and  the  taxes  collected 
in  the  same  way  and  at  the  same  rate  as  those  upon  property  in  the  hands  of 
individuals. 

New  York. — Telegraph  companies  are  subject  to  a  State  tax  upon  gross 
earnings  from  business  wholly  within  the  State  at  the  rate  of  \  of  1%,  and  to  an 
State  franchise  tax  upon  capital  stock,  the  rates  varying  from  \  of  a  mill  per 
$1  for  each  1  %  of  dividends  declared  to  1^  mills  on  each  $1  of  capital  stock  em- 
ployed in  the  State,  according  to  the  amount  of  dividends  declared.  In  addi- 
tion to  these  taxes,  telegraph  companies  are  assessed  and  taxed  upon  all  tang- 
ible property  in  the  same  way  as  the  property  of  individuals  is  taxed,  this  tax 
being  for  local  use  only.  Foreign  companies  also  pay  an  additional  State 
license  fee  of  \  of  1  %  upon  the  capital  stock  employed  in  the  State. 

North  Carolina. — Telegraph  companies  are  assessed  by  the  State  Tax 
Commission  upon  all  their  property,  including  franchises  and  mortgages  upon 
such  property,  the  valuation  being  apportioned  to  the  counties  and  taxing 
districts,  where  the  taxes  are  levied  at  the  rate  of  the  general  property  tax.  In 
addition  to  the  ad  valorem  taxes,  such  companies  are  taxed  by  the  State  upon 
their  gross  receipts  from  business  done  wholly  within  the  State  at  the  rate  of 
2£%  and  municipal  license  fees  based  upon  population,  the  amounts  varying 
from  $10  to  $50,  are  allowed. 

North  Dakota. — Telegraph  companies  are  taxed  upon  all  their  property 
under  the  general  property  tax,  the  assessment  of  real  estate  being  made  by 
local  officers  and  that  of  franchise,  poles,  and  wire  by  the  State  Board  of 
Equalization.  The  valuation  made  by  the  State  Board  is  apportioned  to  the 
counties  upon  the  basis  of  mileage,  and  the  taxes  collected  locally.  In  unor- 
ganized counties  the  taxes  are  collected  by  the  State  Auditor  for  State  use  only. 

Ohio. — Telegraph  companies  are  taxed  by  the  State  upon  their  gross  re- 
ceipts from  intra-state  business  at  the  rate  of  2  %.  In  addition  to  this  they  are 
taxed  upon  the  market  value  of  their  capital  stock  (less  real  estate  locally  taxed) 
as  determined  by  the  State  Tax  Commission,  and  upon  all  real  estate  as  assessed 
by  local  officers.  The  valuation  of  the  stock  is  apportioned  to  the  counties  and 
the  taxes  upon  it,  as  well  as  those  upon  real  estate,  are  collected  in  the  same 
way  and  at  the  same  rate  as  those  upon  property  in  the  hands  of  individuals. 

Oklahoma. — Telegraph  companies  are  taxed  upon  all  their  property 
under  the  general  property  tax,  the  assessments  being  made  by  either  State 
or  local  officers.  Intra-state  companies  are  taxed  in  addition  to  this  2  per 
cent  upon  their  gross  receipts  from  operation. 

Oregon. — Telegraph  companies  are  taxed  under  the  general  property  tax 
upon  all  their  property  as  assessed  by  the  State  Board,  the  valuations  being 
apportioned  to  the  counties  and  the  taxes  collected  in  the  same  way  as  those 
upon  property  in  the  hands  of  individuals. 


Appendix  A — Telegraph  Companies  225 

Pennsylvania. — Telegraph  companies  are  taxed  by  the  State  as  follows: 
5  mills  on  each  $1  actual  value  of  capital  stock;  8  mills  on  each  $1  of  gross 
receipts  from  traffic  wholly  within  the  State;  4  mills  on  each  $1  of  bonds 
owned  within  the  State.  In  addition  to  these  State  taxes,  real  and  personal 
property  necessary  to  the  business  is  taxed  locally  under  the  general  property 
tax  in  Pittsburgh  and  Philadelphia,  but  such  property  is  exempt  elsewhere. 

Rhode  Island. — Telegraph  companies  are  taxed  by  the  State  upon  their 
gross  receipts  from  operation  within  the  State  at  the  rate  of  2%  in  lieu  of  all 
other  taxes  on  intangible  personal  property  or  corporate  excess  and  in  lieu  of 
all  other  taxation  on  personal  property  used  in  the  business.  Real  estate  is 
.taxed  as  that  of  individuals. 

South  Carolina. — Telegraph  companies  are  taxed  by  the  State  upon 
their  gross  receipts  from  business  within  the  State  at  the  rate  of  3  mills.  In 
addition  to  this  they  are  assessed  by  the  State  Board  of  Assessors  upon  the 
market  value  of  their  capital  stock  plus  mortgages,  this  valuation  being  appor- 
tioned to  the  counties  and  taxing  districts,  where  the  taxes  upon  it  are  collected 
at  the  same  rate  and  in  the  same  manner  as  those  upon  property  in  the  hands 
of  individuals. 

South  Dakota. — Telegraph  companies  are  taxed  at  the  rate  of  the  general 
property  tax  upon  all  their  property  as  assessed  by  the  State  board,  the  taxes 
being  paid  to  the  State  Treasurer  and  then  distributed  to  the  counties  upon 
the  basis  of  the  property  of  such  companies  situated  therein.  This  tax  is  in 
lieu  of  all  others  upon  the  property  of  such  companies.  Shares  of  stock  are 
taxed  to  the  holders. 

Tennessee. — Telegraph  companies  are  assessed  and  taxed  upon  all  their 
property  under  the  general  property  tax;  property  having  an  actual  situs  is 
assessed  by  local  officers,  all  other  property  by  the  State  Tax  Commissioners. 
The  valuation  made  by  the  State  Commissioners  is  apportioned  to  the  counties 
and  taxing  districts  and  the  taxes  upon  it,  as  well  as  those  upon  local  property, 
collected  in  the  same  way  as  those  upon  property  of  individuals.  In  addition  to 
these  taxes,  telegraph  companies  are  subject  to  State  license  taxes  varying 
from  $20  for  companies  operating  from  25  to  100  miles  of  wire  to  $700  for 
companies  operating  from  300  to  1,000  miles  of  wire,  with  an  additional  $20 
for  each  100  miles  of  wire  in  excess  of  1,000  miles  up  to  6,000  miles,  and  $10  for 
each  100  miles  in  excess  of  6,000  miles. 

Texas. — Telegraph  companies  are  taxed  by  the  State  upon  their  gross 
receipts  from  business  within  the  State  at  the  rate  of  2f%,  and  are  also  subject 
to  a  franchise  tax  upon  the  amount  of  capital  stock,  surplus  and  undivided 
profits,  the  rates  of  which  tax  are  50  cents  on  $1,000  up  to  $1,000,000  and  25 
cents  upon  each  $1,000  in  excess  thereof,  for  domestic  companies;  foreign 
companies  pay  $1  on  each  $1,000  up  to  $100,000  and  $2  on  each  $5,000  in 
excess  of  $100,000  up  to  $1,000,000  and  $2  on  each  $20,000  in  excess  thereof. 
In  addition  to  these  taxes  such  companies  are  assessed  locally  upon  all  their 
property  under  the  general  property  tax. 

Utah. — Telegraph  companies  are  taxed  upon  all  their  property,  including 
franchises,  under  the  general  property  tax,  the  assessment  being  made  by  the 
8 


226  Report  of  Nebraska  Tax  Commission 

State  Board  and  the  valuation  apportioned  to  the  taxing  units  where  the  taxes 
are  collected  in  the  same  way  as  those  upon  property  in  the  hands  of  individ- 
uals. In  addition  to  this  tax,  such  companies  are  subject  to  a  State  license 
tax  based  upon  the  authorized  amount  of  capital  stock,  the  fees  varying  from 
$5  to  $50.  The  property  of  telegraph  companies  operating  in  only  one  county 
is  assessed  and  taxed  locally  as  property  of  individuals  is  taxed. 

Vermont. — Telegraph  companies  are  taxed  by  the  State  upon  their 
gross  receipts  collected  within  the  State  at  the  rate  of  3%  or,  in  lieu  thereof, 
60  cents  per  mile  for  poles  and  one  line  of  wire  and  40  cents  for  each  additional 
wire  owned  and  operated  within  the  State.  They  are  exempt  from  all  local 
taxation  except  upon  property  not  used  in  the  business.  Shares  of  stock  in 
such  companies  are  assessed  and  taxed  to  the  holders  as  personal  property. 
Telegraph  companies  are  also  subject  to  the  State  license  tax  upon  capital 
stock,  the  fees  varying  from  $10  to  $50. 

Virginia. — Telegraph  companies  are  subject  to  the  State  property  tax 
upon  all  property,  the  assessment  being  made  by  the  State  Corporation  Com- 
mission and  the  rate  of  taxation  being  35  cents  on  $100.  Tangible  property  is 
taxed  locally  under  the  general  property  tax.  In  addition  to  these  ad  valorem 
taxes  such  companies  are  taxed  by  the  State  $2  per  mile  on  poles  and  conduits 
and  2  %  upon  intra-state  gross  earnings.  Shares  of  foreign  companies  are 
taxed  to  the  holders.  Local  license  taxes  are  allowed. 

Washington. — The  property  of  telegraph  companies  is  assessed  by  the 
State  Board  of  Tax  Commissioners,  the  valuation  being  apportioned  to  the 
counties  upon  the  basis  of  mileage,  and  the  taxes  collected  at  the  same  rate  and 
in  the  same  manner  as  those  upon  the  property  of  individuals. 

West  Virginia. — Telegraph  companies  are  taxed  upon  all  their  property 
as  assessed  by  the  State  board,  the  rate  of  taxation  being  that  of  the  general 
property  tax.  In  addition  to  this  tax  all  domestic  companies  pay  a  State 
license  tax  upon  the  authorized  amount  of  capital  stock,  the  fees  varying  from 
$10  if  the  stock  is  $5,000  or  less  to  $170  if  the  stock  is  $1,000,000  with  an  addi- 
tional fee  of  $60  on  each  milion  dollars  or  fraction  thereof  in,  excess  of  one 
million.  Foreign  companies  pay  a  State  license  tax  of  $1.00  per  mile  of  wire 
between  cities  and  towns  (one  line  of  wire  counted),  but  not  in  local  exchanges 
the  minimum  tax  being  $100.00. 

Wisconsin. — Telegraph  companies  are  taxed  upon  all  their  property,  in- 
ducing franchises,  by  the  State  at  the  rate  of  the  general  property  tax  as 
determined  by  the  State  Commission. 

Wyoming. — All  property  of  telegraph  companies  is  assessed  by  the  State 
Board  and  the  valuation  apportioned  to  the  various  taxing  districts,  where 
the  taxes  are  collected  at  the  same  rate  and  in  the  same  way  as  those  upon 
property  in  the  hands  of  individuals.  Local  assessment  and  taxation  by  in- 
corporated towns,  villages,  and  cities  is  allowed. 


Appendix  B  227 


APPENDIX  B 

Table  Showing  the  Interest  Rate  on  Real  Estate  Mortgages 

Filed  in  Twelve  Counties  During  the  Year  Preceding, 

and   the   Year   Following  July   1,    1911,   the   Date 

when  the  Smith   Mortgage  Tax  Law  Became 

Effective 

BANNER  COUNTY 

I.    YEAR  ENDING  JUNE  30,  1911 

No.  Loans                   Principal      Rate  Interest 

12 $36,050.00  at     6%. $2,163.00 

3 7,900.00  at     7% 533.00 

13 25,801.00  at     8% 2,064.08 

12.  ., 27,069.25  at  10% 2,706.93 


Total  40 $96,820.25 $7,487.01 

Average  rate  7.7% 

II.    YEAR  ENDING  JUNE  30,  1912.    WITH  TAX  CLAUSE 

No  Loans                    Principal      Rate  Interest 

5 $15,892.53  at     6% $953.55 

6 10,510.00  at     7% 735.70 

3 5,215.00  at     8% 417.20 

19. .. 15,943.70  at  10%. 1,594.37 


Total  33 .$47,561.23 $3,700.82 

Average  rate  7.7% 

HI.    YEAR  ENDING  JUNE  30,  1912.    WITHOUT  TAX  CLAUSE 

No.  Loans                   Principal      Rate  Interest 

2 $1,200.00  at     6% $72.00 

1 800.00  at     6|% 52.00 

1 500.00  at     7%. 35.00 

6 12,072.50  at     8% 965.80 

11 7,478.85  at  10% 747.89 


Total  21 $22,051.35 $1,872.69 

Average  rate  8.4% 


228  Report  of  Nebraska  Tax  Commission 

CUMING  COUNTY 
I.    YEAR  ENDING  JUNE  30,  1911 

No.  Loans                   Principal      Rate  Interest 

12 $185,440.00  at     5% $9,272.00 

10 74,250.00  at     5£% 4,083.75 

19 146,956.00  at    -3% 8,817.36 

4 5,450.00  at     7% 381.50 

2 10,250.00  at  -"8% 820.00 

1. .                       664.00  at  10% 66.40 


Total  48 $423,010.00 $23,441.01 

Average  rate  5.5% 

II.    YEAR  ENDING  JUNE  30,  1912.    WITH  TAX  CLAUSE 

No.  Loans  Principal      Rate  Interest 

1 $5,000.00  at     4J.% $225.00 

31 190,146.00  at     5% 9,507.30 

14 47,200.00  at     5J% 2,596.00 

1 5,000.00  at     5f% 287.50 

29 84,150.00  at     6%... 5,049.00 

3 5,000.00  at     6J% 325.00 

12 24,300.00  at     7% 1,701.00 

2 7,000.00  at     8%. 560.00 

1 200.00  at  10% 20.00 


Total  94 $367,996.00 $20,270.80 

Average  rate  5.5% 

III.    YEAR  ENDING  JUNE  30,  1912.    WITHOUT  TAX  CLAUSE 

No.  Loans  Principal      Rate  Interest 

1 $4,500.00  at     4% $180.00 

13 61,700.00  at     5% 3,085.00 

5 22,600.00  at     5J% 1,243.00 

11 30,742.00  at     6% 1,844.52 

12 17,900.00  at     7% 1,253.00 

6 5,050.00  at     8% 404.00 

2.........       1,700.00  at     9% 153.00 

1 1,500.00  at  10% 150.00 


Total  51 $145,692.00 $8,312.52 

Average  rate  5,7% 


Appendix  B  229 

DAWES  COUNTY 

I.    YEAR  ENDING  JUNE  30,  1911 

No.  Loans                   Principal      Rate  Interest 

2 $4,000.00  at     5% $200.00 

16 27,740.00  at     6% 1,664.40 

21 27,668.00  at     7% 1,936.76 

72 158,657.00  at     8% 12,692.56 

2 3,600.00  at     9% 324.00 

36 57,948.00  at  10% 5,794.80 


Totall49 $279,613.00        $22,612,52 

Average  rate  8.08% 

II.    YEAR  ENDING  JUNE  30,  1912.    WITH  TAX  CLAUSE 

No.  Loans  Principal      Rate  Interest 

4 $28,000.00  at     5%. $1,400.00 

18 33,663.00  at     6% 2,019.78 

11 16,743.00  at     7% 1,172.01 

1 500.00  at     7f% 38.75 

39 59,491.00  at     8% "...  4,759.28 

2 2,900.00  at     9% 261.00 

33 77,682.00  at  10% 7,768.20 


Total  108 $218,979.00 $17,419.02 

Average  rate  7.9% 

III.    YEAR  ENDING  JUNE  30,  1912.    WITHOUT  TAX  CLAUSE 

No.  Loans  Principal      Rate  Interest 

1 $400.00  at     4% $16.00 

2 7,500.00  at     5% 375.00 

13 29,085.00  at     6% 1,745.10 

10 20,548.00  at     7% 1,438.26 

34 -..  45,360.00  at     8% 3,628.80 

16 18,404.00  at  10% 1,840.40 


Total  76 $121,297.00        $9,043.56 

Average  rate  7.4% 


230  Report  of  Nebraska  Tax  Commission 

FRANKLIN  COUNTY 

I.    YEAR  ENDING  JUNE  30,  1911 

No.  Loans  Principal      Rate  Interest 

26 $73,600.00  at     5% $3,680.00 

17 42,550.00  at     5J% 2,340.25 

89 223,356.00  at     6% 13,401.36 

2 1,900.00  at     6J% 123.50 

18 28,620.00  at     7% 2,003.40 

1 1,000.00  at     7J% 75.00 

9 13,721.00  at     8% 1,097.68 

7 , .     13,695.00  at  10% 1,369.50 

Total  169 $398,442.00 $24,090.69 

Average  rate  6.04% 

II.    YEAR  ENDING  JUNE  30,  1912.    WITH  TAX  CLAUSE 
No  Loans  Principal      Rate  Interest 

44 $136,147.00  at     5% $6,807.35 

15 36,650.00  at     5i% 2,015.75 

73 224,4^5.00  at     6% 13,469.70 

1. 300.00  at     6J% 19.50 

14 19,200.00  at     7% 1,344.00 

7 4,825.00  at     8% 386.00 

5 6,070.00  at  10% 607.00 

Total  159 $427,687.00 TV.  . $24,649.30 

Average  rate  5.7% 

III.    YEAR  ENDING  JUNE  30,  1912.    WITHOUT  TAX  CLAUSE 
No  Loans  Principal      Rate  Interest 

1 $3,500.00  at     2i% $87.50 

1     6,000.00  at    4% 240.00 

3  16,000.00  at     5% 800.00 

2 5,500.00  at     5J% 302.50 

14       49,350.00  at     6% 2,961.00 

1 600.00  at     6i% 39.00 

9 11,075.00  at     7%. 775.25 

4       8,950.00  at     8% 716.00 

1 3,790.00  at  10% 379.00 

Total~36 .$104,765.00 $6,300.25 

Average  rate  6% 


Appendix  B,  231 

HITCHCOCK  COUNTY 

I.    YEAR  ENDING  JUNE  30,  1911 

No.  Loans                  Principal      Rate  Interest 

20 . .  $12,015.00  at     5% $600.75 

1 1,250.00  at     5j% 68.75 

24 38,919.00  at     6% 2,335.14 

1 600.00  at     6i% 39.00 

35 73,175.00  at     7% 5,122.25 

47 58,265.00  at     8% 4,661.20 

8 4,200.00  at     9% 378.00 

37. .                  28,693.60  at  10% 2,869.36 


Totall73 $217,117.60 $16,074.45 

Average  rate  7.4% 

II.    YEAR  ENDING  JUNE  30,  1912.    WITH  TAX  CLAUSE 

No.  Loans  Principal      Rate  Interest 

14 $5,220.00  at     5% $261.00 

17 31,430.80  at     6% 1,885.84 

9 24,450.00  at     7% 1,711.50 

16.... 22,100.00  at     8% 1,768.00 

22 28,400.00  at     9% 2,556.00 

24 16,070.90  at  10% 1,607.09 


Totall02 $127,671.70 $9,789.43 

Average  rate  7.6% 

III.    YEAR  ENDING  JUNE  30,  1912.    WITHOUT  TAX  CLAUSE 

No.  Loans  Principal      Rate  Interest 

14 $28,525.00  at     6% $1,711.50 

1 1,450.00  at     6i% 94.25 

11 14,835.00  at     7% 1,038.45 

20 27,705.02  at     8% 2,216.40 

1 1,550.00  at     9% 139.50 

20 14,796.55  at  10% 1,479.65 


Total  67 $88,861.57 $6,679.75 

Average  rate  7.5% 


232  Report  of  Nebraska  Tax  Commission 

HOOKER  COUNTY 
I.    YEAR  ENDING  JUNE  30,  1911 

No.  Loans                   Principal      Rate  Interest 

7 $13,600.00  at     5% $680.00 

1 5,800.00  at     6% 348.00 

1 1,000.00  at     7% 70.00 

20 40,972.52  at     8% 3,277.80 

8 7,389.53  at  10% 738.95 


Total  37 $68,762.05 $5,114.75 

Average  rate  7.4% 

II.    YEAR  ENDING  JUNE  30,  1912.    WITH  TAX  CLAUSE 

No.  Loans  Principal      Rate  Interest 

5 $4,850.00  at     5% $242.50 

1 700.00  at    7 49.00 

7 8,781.76  at     8% 702.54 

17 20,601.57  at  10% 2,060.16 


Total  30 $34,933.33 $3,054.20 

Average  rate  8.7% 

III.    YEAR  ENDING  JUNE  30,  1912.    WITHOUT  TAX  CLAUSE 

No.  Loans  Principal      Rate  Interest 

2 $675.00  at     8% $54.00 

2 2,000.00  at  10% 200.00 


Total     4 $2,675.00 $254.00 

Average  rate  9.4% 

LOGAN  COUNTY 
I.    YEAR  ENDING  JUNE  30,  1911 

No.  Loans                   Principal      Rate  Interest 

18 $25,800.00  at     6% $1,548.00 

10 29,097.00  at     7% 2,036.79 

6 51,428.00  at     8 4,114.24 

3 2,300.00  at     9% 207.00 

13 6,217.83  at  10% 621.78 


Total  50. $114,842.83 $8,527.81 

Average  rate  7.4% 


Appendix  B  233 

II.    YEAR  ENDING  JUNE  30,  1912.    WITH  TAX  CLAUSE 

No.  Loans                   Principal      Rate  Interest 

2 $1,500.00  at     6% $90.00 

Average  rate  6% 

III.    YEAR  ENDING  JUNE  30,  1912.    WITHOUT  TAX  CLAUSE 

No.  Loans                   Principal      Rate  Interest 

16 $32,645.00  at     6% $1,958.70 

7 19,950.00  at     7% 1,396.50 

9 8,400.00  at     8% 672.00 

30 19,575.15  at  10% 1,957.52 

Total  62 $80,570.15 $5,984.72 

Average  rate  7.4% 

NEMAHA  COUNTY 

I.    YEAR  ENDING  JUNE  30,  1911 

No.  Loans                   Principal      Rate  Interest 

16 .  $77,800.00  at     5% $3,890.00 

15 62,300.00  at     5J% 3,426.50 

78 192,355.00  at     6% 11,541.30 

2 5,700.00  at     6J% 370.50 

28 26,093.00  at     7% 1,826.51 

54 44,655.00  at     8% 3,572.40 

1 250.00  at     9% 22.50 

6 6,875.00  at  10% 687.50 

Total200 $416,028.00 $25,337.21 

Average  rate  6.09% 

II.    YEAR  ENDING  JUNE  30,  1912.    WITH  TAX  CLAUSE 

No.  Loans                   Principal      Rate  Interest 

16 $50,300.00  at     5% $2,515.00 

12 67,000.00  at     5J% 3,685.00 

2 14,000.00  at     57-10% 798.00 

62 167,660.00  at     6% 10,059.60 

1 2,000.00  at     6J% 130.00 

17. 24,235.00  at     7% 1,696.45 

17 17,226.00  at     8% 1,378.08 

6. 6,490.00  at  10% 649.00 

Total  133 $348,911.00. ..'...- $20,911.13 

Average  rate  5.9% 


234  Report  of  Nebraska  Tax  Commission 

III.    YEAR  ENDING  JUNE  30,  1912.    WITHOUT  TAX  CLAUSE 

No.  Loans                   Principal      Rate  Interest 

3 $7,290.00  at     5% $364.50 

3 10,450.00  at     5J% 574.75 

1 3,400.00  at     5f% 195.50 

45 203,058.00  at     6% 12,183.48 

1 2,500.00  at     6J% 2,500.00 

17... 23,400.00  at     7% 1,638.00 

21 22,430.00  at     8% 1,794.40 

1 350.00  at     9%. 31.50 

2 2,490.00  at  10% 249.00 


Total  94 $275,368.00 , $16,254.38 

Average  rate  5.9% 

NUCKOLLS  COUNTY 

I.    YEAR  ENDING  JUNE  30,  1911 

.  Loans                   Principal      Rate  Interest 

4 $21,000.00  at  4% $840.00 

29 112,079.00  at  5% 5,603.95 

44 196,300.00  at  5J% 10,796.50 

2 8,400.00  at  5f%.. 483.00 

52 174,708.00  at  6% 10,482.48 

2 10,300.00  at  6i% 669.50 

T  28 45,594.38  at  7% 3,191.61 

51 51,583.96  at  8% 4,126.72 

1 2,000.00  at  9% 180.00 

14 12,121.25  at  10% 1,212.13 


Total  227 .$634.086.59 $37,585.89 

Average  rate  5.9% 


Appendix  B  235 

II.    YEAR  ENDING  JUNE  30,  1912.    WITH  TAX  CLAUSE 

No.  Loans  Principal      Rate  Interest 

2 $6,037.50  at  4% $241.50 

49 178,000.00  at  5% 8,900.00 

41. 171,350.00  at  5J% 9,424.25 

22 59,940.00  at  6% 3,596.40 

2 1,500.00  at  6|% 97.50 

10 29,750.00  at  7% 2,082.50 

2 1,650.00  at  7J% 123.75 

49 56,436.17  at  8% 4,594.89 

1 1,610.00  at  10% 161.00 

Totall78 $506,273.67 $29,141.79 

Average  rate  5.7% 

YEAR  ENDING  JUNE  30,  1913.    WITH  TAX  CLAUSE 

No.  Loans  Principal                                         Interest 

1 $14,000.00  at     4% $560.00 

53 219,000.00  at     5% 10,950.00 

36 127,950.00  at     5|% 7,037.25 

45. 120,191.00  at     6% 7,211.46 

35 51,975.00  at     7% 3,638.25 

81 106,302.00  at     8% 8,504.16 

11 5,559.00  at  10% 555.90 

Total  262 $644,977.00 $38,457.02 

Average  rate  5.9% 

III.    YEAR  ENDING  JUNE  30,  1912.    WITHOUT  TAX  CLAUSE 

No.  Loans  Principal      Rate  Interest 

8 $27,400.00  at     5% $1,370.00 

4 10,800.00  at     5J% 594.00 

1 1,600.00  at     5f% 92.00 

31 80,422.67  at     6% 4,825.36 

3 3,700.00  at     6J% 240.50 

14 18,925.00  at     7% 1,324.75 

39 27,704.76  at     8% 2,216.38 

9 5,167.21  at  10% 516.72 

Totall09 $175,719.64 $11,179.71 

Average  rate  6.3% 


236  Report  of  Nebraska  Tax  Commission 

IV.  YEAR  ENDING  JUNE  30,  1913.    WITHOUT  TAX  CLAUSE 

No.  Loans                   Principal      Rate  Interest 

6 $15,050.00  at     5% $752.50 

4 19,700.00  at     51% 1,083.50 

3 15,000.00  at     5f% 862.50 

10 29,979.00  at     6% 1,798.74 

6 12,888.00  at     7% 902.16 

12..                  13,390.00  at     8%..  1,071.20 


Total  41 $106,007.00 $6,470.60 

Average  rate  6.1% 

POLK  COUNTY 

I,    YEAR  ENDING  JUNE  30,  1911 

No.  Loans                   Principal      Rate  Interest 

1 $1,500.00  at     2% $30.00 

1 4,500.00  at     2J% 112,50 

1. .  . .  • 1,100.00  at     3% 33.00 

2 3,500.00  at     4% 140.00 

45 138,795.00  at     5% 6,939.75 

23 60,990.00  at     51% 3,354.45 

1 3,700.00  at     5f% 212.75 

79. .  .- 143,653.00  at     6% 8,619.18 

6 5,175.00  at     6J% 336.37 

23. 43,258.00  at     7% 3,028.06 

1 700.00  at     71% 52.50 

18 22,628.00  at     8% 1,810.24 

2. ........       1,000.00  at  10% 100.00 


Total  203 $430,499.00 $24,768.80 

Average  rate  5.7% 


Appendix  B  237 

II.    YEAR  ENDING  JUNE  30,  1912.    WITH  TAX  CLAUSE 
No.  Loans  Principal      Rate  Interest 

53 $202,147.00  at     5% $10,107.35 

33 158,000.00  at     5J% 8,690.00 

2.... 6,000.00  at     5f% 345.00 

80 179.540.00  at     6% 10,772.40 

5 4,050.00  at     6|% 263.25 

14 23,625.00  at     7% 1,653.75 

12 13,980.00  at     8% 1,118.40 

2 835.00  at  10% 83.50 


Total  201 $588,177.00 $33,033.65 

Average  rate  5.6% 

III.    YEAR  ENDING  JUNE  30,  1912.    WITHOUT  TAX  CLAUSE 

No.  Loans  Principal      Rate  Interest 

2 $43,400.00  at     5% $2,170.00 

2 7,000.00  at     5J% 385.00 

6 29,800.00  at     6%. 1,788.00 

1 2,000.00  at     7% 140.00 

2 640.00  at     8% 51.20 


Total   13 $82,840.00 $4,534.20 

Average  rate  5.4% 

WAYNE  COUNTY 
I.    YEAR  ENDING  JUNE  30,  1911 

No.  Loans  Principal      Rate  Interest 

1 $600.00  at     4% $24.00 

1 10,000.00  at     4i% 450.00 

45 183,567.14  at     5% 9,178.35 

57 253,900.00  at     5f% 13,964.50 

70 308,343.35  at     6% 18,500.60 

2 6,000.00  at     6J% 380.00 

2 1,450.00  at     6J% 94.25 

28 49,600.00  at     7% 3,472.00 

30 24,460.90  at     8% 1,957.19 

5. .           . .     16,820.00  at  10% 1,682.00 


Total241 $854,741.39 $49,702.89 

Average  rate  5.8% 


238  Report  of  Nebraska  Tax  Commission 

II.    YEAR  ENDING  JUNE  30,  1912.    WITH  TAX  CLAUSE 

No.  Loans                   Principal      Rate  Interest 

1 $11,400.00  at    4% $456.00 

79 383,900.00  at     5% 19,195.00 

28 140,200.00  at     5J% 7,711.00 

42 161,625.00  at     6% 9,697.50 

11 23,400.00  at     7% 1,638.00 

23 27,838.00  at     8% 2,227.04 

5 3,600.00  at  10% 360.00 


Totall89 $751,963.90 $41,284.54 

Average  rate  5.4% 

III.    YEAR  ENDING  JUNE  30,  1912.    WITHOUT  TAX  CLAUSE 

No.  Loans  Principal      Rate  Interest 

8 $33,240.00  at     5% $1,662.00 

6 35,500.00  at     5}%...-. 1,952.50 

12. 25,500.00  at     6% 1,530.00 

11 20,375.00  at     7% 1,426.25 

15 16,772.65  at     8% 1,331.81 

1 700.00  at  10% 70.00 


Total  53 $132,087.65 $7,972.56 

COUNTY 

I.    YEAR  ENDING  JUNE  30,  1911 

No.  Loans                   Principal      Rate  Interest 

1 $4,000.00  at     4% $160.00 

7 12,700.00  at     5% 635.00 

38 117,900.00  at     6% 7,074.00 

2 2,200.00  at     6J% 143.00 

17 29,330.00  at     7%.. 2,053.10 

9 12,800.00  at     8% 1,024.00 

9 5,050.00  at  10% 505.00 


Total  83 $183,980.00 $11,594.10 

Average  rate  6.3% 


Appendix  B  239 

II.    YEAR  ENDING  JUNE  30,  1912.    WITH  TAX  CLAUSE 

No.  Loans                   Principal      Rate  Interest 

7. .........     $9,880.00  at     5% $494.00 

10 21,350.00  at     5J% 1,174.25 

51 109,376.00  at     6% 6,562.56 

3 5,300.00  at     6J% 344.50 

23 38,675.00  at     7% 2,707.25 

12 23,375.00  at     8% 1,870.00 

14..                    5,425.00  at     10..  542.50 


Total  120 $213,381.00 $13,695.06 

Average  rate  6.4% 

III.    YEAR  ENDING  JUNE  30,  1912.    WITHOUT  TAX  CLAUSE 

No.  Loans  Principal      Rate  Interest 

12. . . ! $28,860.00  at     6% $1,731.60 

1 1,800.00  at  6J% 117.00 

5 8,955.00  at     7% .  626.85 

5 3,450.00  at     8%... 276.00 

1 2,000.00  at     9% 180.00 

1 75.00  at  10% 7.50 


Total  25 $45,140.00 $2,938.95 

Average  rate  6.5% 


240 


Report  of  Nebraska  Tax  Commission 


Table   of   Nebraska   Counties   Showing  All   Taxes   Charged   for  All    County 

Purposes,   Including  Average  Levies  of  Township,   Road  District 

and   All    Minor   Divisions   Which    Co-operate   With 

County  Government,  for  the  Year  1913 

Prepared  by  WARD  NEWCOMB,  Clerk  of  Clay  County 


Counties 

Assessed 
Valuation 

County  General 
Fund,  Including 
Levies  for  Aid, 
Soldiers'  Relief, 
Jury  and  Insanity 

County  Bridge 
Fund,  Including 
Bridge  Bond 
and  Emergency 
Bridge  Levies 

County  Road 
Fund,  Including 
County  Ditch 
and  Dragging 
Levies 

Rate  per 
$1000 

Amount 
Charged 

Rate  per 
$1000 

Amount 
Charged 

Rate  per 
$1000 

Amount 
Charged 

Adams  *S 
Antelope  .  .  .  .  S 
Banner.  
Elaine  
Boone  
BoxButte..  .  . 
Boyd  S 

$7,657,232 
5,283,142 
436,929 
587,155 
5,608,066 
2,052,616 
2,798,599 
1,832,301 
7,623,468 
6,996,826 
7,917,320 
8,430,797 
8,211,089 
-1,080,509 
3,577,400 
2,738,647 
8,071,012 
5,822,425 
7,802,685 
7,408,979 
3,180,568 
2,267,310 
6,671,635 
1,221,201 
4,685,992 
9,618,980 
45,486,359 
1,516,763 
7,477,178 
3,924,478 
2,710,601 
4,030,376 
11,631,679 
1,006,711 
714,763 
1,953,689 
749,981 
3,429,607 
7,918,553 
7,924,559 
3,320,926 
734,001 
1,887,351 
4,737,294 
558,092 
4,433,952 
6,982,280 
4,756.115 

$7.10 
5.00 
9.00 
8.20 
5.00 
9.00 
7.10 
9.00 
5.10 
4.20 
5.05 
5.20 
6.00 
9.00 
9.00 
8.00 
3.30 
5.20 
6.10 
7.70 
3.20 
9.00 
8.00 
9.10 
7.00 
6.10 
9.21 
8.20 
3.90 
6.00 
6.00 
5.70 
6.22 
9.10 
9.25 
5.00 
7.50 
5.50 
5.21 
4.60 
5.20 
9.00 
8.00 
8.20 
9.00 
6.05 
4.20 
7,50 

$54,366 
26,416 
3,932 
4,815 
28,040 
18,474 
19,870 
16,491 
38,880 
29,397 
39,982 
43,840 
49,267 
9,725 
32,197 
21,909 
26,634 
30,277 
47,596 
57,049 
10,178 
20,406 
53,373 
11,113 
32,802 
58,676 
418,929 
12,437 
29,151 
23,547 
16,264 
22,973 
72,349 
9,161 
6,611 
9,768 
5,625 
18,863 
41,256 
36,453 
17,269 
6,606 
15,099 
38,846 
5,023 
26,825 
29,326 
35,671 

$2.90 
3.00 
1.50 
2.50 
4.00 
4.00 
3.00 
3.00 
4.00 
5.00 
3.35 
4.00 
2.00 
3.00 
3.00 
1.50 
1.80 
5.00 
5.00 
2.00 
5.00 
3.00 
4.00 
1.00 
4.00 
5.00 
2.40 
2.00 
2.80 
2.75 
4.20 
4.00 
4.88 
2.00 
4.00 
4.00 

$22,206 
15,849 
655 
1,468 
22,432 
8,210 
8,396 
5,497 
30,494 
34,984 
26,523 
33,723 
16,422 
3,242 
10,732 
4,108 
14,528 
29,112 
39,013 
14,818 
15,903 
6,802 
26,687 
1,221 
18,744 
48,095 
109,167 
3,034 
20,936 
10,792 
11,385 
16,122 
56,763 
2,013 
2,859 
7,815 

$2.00 
2.50 
5.00 
2.00 
.80 
3.00 

'  '  .80  ' 

'3.06' 
1.20 
3.00 
3.00 
2.00 
.50 
3.00 
.10 
2.00 
3.00 
3.00 
4.00 
3.00 
1.20 
1.10 
1.09 
2.00 
1.00 
1.25 
4.00 
2.00 
.39 
3.90 
2.00 
4.00 

$874 
1,468 
28,040 
4,105 
2,239 
5,497 

5,597 

25,292 
9,853 
3,242 
10,732 
5,477 
4,036 
17,467 
780 
14,818 
9,542 
6,802 
26,687 
4,763 
5,623 
10,581 
49,580 
3,034 
7,477 
4,906 
10,842 
8,061 
4,536 
3,926 
1,430 
7,815 

Brown 

Buffalo  S 
Burt  S 
Butler  S 
Cass  
Cedar  

Chase  
Cherry  
Cheyenne.  .  .  . 
Clay  S 
Colfax  
Cuming  S 

Custer  S 
Dakota  
Dawes  
Dawson  
Deuel  
Dixon  S 
Dodge  S 
Douglas  .... 

Dundy  
Fillmore  S 
Franklin  .  .  .  .  S 
Frontier  

Furnas 

Gage  ...  S 

Garden  
Garfield  
Gosper 

Grant 

Greeley.  . 
Hall  S 
Hamilton  
Harlan            S 

4.00 
3.20 
4.00 
3.00 
3.00 
3.00 
5.00 
1.00 
5.00 
3.00 
4,00 

13,718 
25,339 
31,698 
9,963 
2,202 
5,662 
23,686 
558 
22,170 
20,9471 
19,024 

4.00 
.51 
2.10 

'3.06' 
2.00 
1.00 
2.00 
3.00 
5.00 
8,40 

13,718 
4,038 
16,642 

2,202 
3,775 
4,737 
1,116 
13,302 
84,911 
16,171 

Hayes  
Hitchcock  .... 
Holt  S 
Hooker  . 

Howard.  .  ,  . 

Jefferson  

Johnson,, 

Appendix  C 


241 


Table   of   Nebraska    Counties   Showing   All   Taxes    Charged    for   All    County 

Purposes,    Including  Average  Levies  of  Township,   Road   District 

and   All    Minor    Divisions    Which    Co-operate   With 

County  Government,  for  the  Year  1913 — (Cont'd) 

Prepared  by  WARD  NEWCOMB,  Clerk  of  Clay  County 


Counties 

Railway  and 
Court  House 
Bonds,  Judgment 
and  Old  Claim 
Levies,  Sinking 
andBuildingFunds 

Township  and 
Special  Road  and 
Bridge  District 
Levies  notUnif  orm 
Over  the  County 
But  Reduced  to 
an  Average  Rate 

Total 

Rate  per 
$1000 

Tax  per 
Capita 
1910 
Census 

Rate  peri  Amount 
$1000     Charged 

Rate  per 
$1000 

Amount 
Charged 

Adams  *S 

$3.70 
5.05 

$28,342 
26,689 

$104,914 
68,954 
5,461 
7,751 
78,512 
35,305 
60,826 
27,485 
113,847 
133,833 
106,661 
115,501 
75,542 
21,612 
53,661 
36,971 
73,856 
79,068 
123,429 
151,572 
36,988 
34,010 
134,150 
17,097 
77,103 
144,957 
714,135 
18,505 
83,200 
56,728 
38,491 
47,156 
194,321 
15,100 
12,330 
25,398 
5,625 
49,729 
112,924 
84,793 
41,855 
11,010 
25,444 
105,511 
8,650 
76,263 
85,619 
70,866 

$13.70 
13.05 
12.50 
13.20 
14.00 
17.20 
21.73 
15.00 
14.93 
19.13 
13.47 
13.70 
9.20 
20.00 
15.00 
13.50 
9.15 
13.58 
15.82 
20.46 
11.63 
15.00 
20.11 
14.00 
16.43 
15.07 
15.70 
12.20 
11.13 
14.45 
14.20 
11.70 
16.71 
15.00 
17.25 
13.00 
7.50 
14.50 
14.26 
10.70 
12.60 
15.00 
13.50 
22.27 
15.50 
17.20 
12.26 
14,90 

$5.00 
4.92 
3.78 
4.64 
5.97 
5.76 
6.89 
4.52 
5.20 
10.52 
6.92 
5.84 
4.97 
5.98 
5.15 
8.12 
4.70 
6.81 
8.96 
5.91 
5.63 
4.12 
8.40 
9.57 
6.72 
6.55 
4.24 
4.52 
5.67 
5.51 
4.49 
3.90 
6.41 
4.27 
3.61 
5.15 
5.13 
6.18 
5.55 
6.30 
4.37 
3.66 
4.70 
6.65 
8.82 
7.07 
5.08 
6,96 

Antelope  S 

Banner 

i             -  -  - 

Elaine        

Boone 

Box  Butte 

$2.20 
4.10 

'.50 
6.20 

$4,516 
11,474 

3',812 
43,380 

..    .1 

Boyd             .   S 

6.73 

5.33 
2.93 
5.07 

18,847 

40,661 
20,475 
40,156 

Brown  ........ 
Buffalo  S 
Burt  S 
Butler              S 

Cass  

1.50 

12,646 

Cedar  

Chase  
Cherry 

5.00 

5,403 



Cheyenne 

2.00 

5,477 

Clay  S 
Colfax  

3.55 

.38 
4.62 
8.76 
.43 

28,658 
2,212 
36,040 
64,887 
1,365 

Cuming  S 

Custer  S 

Dakota  

- 

Dawes  

Dawson  .      ... 

4.00 

26,687 

.11 

716 

Deuel  

Dixon  S 

4.23 

2.87 

19,934 
27,605 

Dodge              S 

Douglas 

3.00 

136,459 

Dundy  

Fillmore  S 

3.43           25,636 
4.45            17,483 

Franklin  S 

Frontier  .  .    . 

Furnas  

1,279 

'  S.'ll  ' 

59',394 

Gage  S 
Garden  

.11 

Garfield  
Gosper  

2.00 

1,430 

Grant  

Greeley 

1.00 
1.28 

3,430 
10,136 

Hall  S 
Hamilton  

4.06 

32,155 

Harlan  S 

4.40 

14,623 

Hayes  

Hitchcock  .  . 

.50 

8.07 

908 
38,242 

Holt  S 

Hooker  

3.50 
2.95 

1,953 
13,080 

Howard  

.20 
.06 

886 
435 

Jefferson  

Johnson  

242 


Report  of  Nebraska  Tax  Commission 


Table  of  Nebraska   Counties  Showing  All  Taxes   Charged  for  All   County 

Purposes,   Including  Average  Levies  of  Township,  Road  District 

and  All   Minor   Divisions   Which   Co-operate   With 

County  Government,  for  the  Year  1913 — (Cont'd) 

Prepared  by  WARD  NEWCOMB,  Clerk  of  Clay  County 


Counties 

Assessed 
Valuation 

County  General 
Fund,  Including 
Levies  for  Aid, 
Soldiers'  Relief, 
Jury  and  Insanity 

County  Bridge 
Fund,  Including 
Bridge  Bond 
and  Emergency 
Bridge  Levies 

County  Road 
Fund,  Including 
County  Ditch 
and  Dragging 
Levies 

Rate  per   Amount 
$1000  |  Charged 

Rate  per 
$1000 

Amount  Rate  per 
Charged     $1000 

Amount 
Charged 

Kearney         S 

4,297,134 
2,166,478 
1,006,543 
1,515,052 
5,841,897 
23,980,164 
5,334,410 
532,445 
419,928 
6,906,174 
545,377 
5,279,341 
1,571,682 
4,171,545 
5,773,820 
6,095,336 
8,726,464 
5,438,629 
1,370,237 
4,400,861 
4,663,348 
9,043,071 
5,663,987 
3,089,829 
7,582,241 
1,192,469 
8,228,839 
4,254,636 
10,493,969 
2,788,631 
8,499,228 
2,860,442 
3,204,661 
1,397,566 
4,416,184 
6,142,077 
532,546 
3,426,161 
3,641,053 
5,862,859 
5,702,159 
5,388,463 
696,934 
9,077,353 

4.76 
9.00 
9.00 
7.50 
5.20 
5.50 
7.00 
9.00 
9.00 
6.20 
9.00 
3.80 
9.00 
6.20 
5.20 
4.00 
6.00 
3.70 
6.10 
4.20 
6.20 
4.20 
4.60 
7.50 
5.70 
9.00 
3.70 
7.50 
5.20 
9.00 
3.50 
9.00 
4.25 
9.00 
7.20 
3.20 
9.00 
7.00 
3.90 
4.10 
5.10 
4.00 
9.00 
3.20 

20,454 
19,498 
9,058 
11,363 
30,378 
131,891 
40,542 
4,792 
3,779 
42,818 
4,908 
20,061 
14,145 
25,864 
30,024 
24,381 
52,359 
20,123 
8,358 
18,484 
28,913 
37,981 
26,054 
23,174 
43,219 
10,732 
30,447 
31,910 
54,569 
25,098 
29,747 
25,744 
13,620 
12,578 
31,797 
19,655 
4,793 
23,983 
14,200 
24,038 
29,081 
21,554 
6,272 
29,048 

2.79 
2.75 
4.00 
.50 
5.00 
2.50 
2.80 
2.00 
4.00 
5.00 
2.75 
3.70 
3.00 
7.00 
5.00 
4.00 
4.00 
4.00 

11,989 
5,958 
4,026 
758 
29,209 
59,950 
14,936 
1,065 
1,680 
34,531 
1,500 
19,534 
4,715 
29,201 
28,869 
24,381 
34,906 
21,755 

.10 
2.75 
2.00 
2.50 
1.00 

430 
5,958 
2,013 
3,788 
5,842 

Keith  
Keya  Paha  .  .  . 
Kimball  

Knox  S 

Lancaster.  .  .  . 
Lincoln  

3.70 
4.00 
2.00 
3.50 
2.75 

19,737 
2,130 
840 
24,172 
1,500 

Logan  . 

Loup 

Madison.  .  .    . 

McPherson  .  .  . 
Merrick  S 
Morrill  

2.50 
1.00 
2.00 
2.00 

3,925 
4,172 
11,548 
12,191 

Nance            S 

Nemaha 

Nuckolls   .    . 

Otoe 

Pawnee  

5.00 
1.50 

27,193 
2,055 

Perkins  

Phelps            S 

Pierce  . 

5.00 
1.80 
2.60 
4.00 
3.50 
3.50 
2.50 
4.00 
4.50 
2.00 
3.00 
3.00 
4.00 
4.00 
5.00 
4.00 
1.00 
4.00 
2.20 
4.00 
4.25 
4.00 
1.00 
2.50 

23,317 
16,278 
14,726 
12,359 
26,538 
4,174 
20,572 
17,019 
47,223 
5,577 
25,498 
8,581 
12,819 
5,590 
22,081 
24,568 
533 
13,705 
8,010 
23,451 
24,234 
21,554 
697 
22,693 

2.00 
1.80 
4.00 
3.00 

9,327 
16,278 
22,656 
9,269 

Platte  S 
Polk  

Red  Willow... 
Richardson.  .S 
Rock 

2.50 
3.00 
3.50 
2.00 
3.00 

2,981 
24,687 
14,891 
20,988 
8,366 

Saline  
Sarpy  

Saunders  

Scott's  Bluff.  . 
Seward           S 

Sheridan 

3.00 
.25 
2.00 
3.00 
3.00 
4.00 
3.00 
.10 
3.20 
1.60 
3.00 
4.00 

8,581 
801 
2,795 
13,249 
18,426 
2,130 
10,278 
364 
18,761 
9,123 
16,165 
2,788 

Sherman  .  .  .  .S 
Sioux  

Stanton  

Thayer 

Thomas  
Thurston  
Valley  S 

Washington.  .  . 
Wayne  . 

Webster  

Wheeler  .  . 

York.             S 

Total.... 

$470,690,414 

$2,815,244 

$1,606,477 

$776,186 

*S—  Supervisor  or  township  organization 

Appendix  C 


243 


Table   of  Nebraska   Counties   Showing  All   Taxes   Charged  for  AH    County 

Purposes,   Including  Average  Levies  of  Township,  Road  District 

and   All   Minor   Divisions   Which   Co-operate   With 

County  Government,  for  the  Year  1913 — (Cont'd) 

Prepared  by  WARD  NEWCOMB,  Clerk  of  Clay  County 


Counties 

Railway  and 
Court  House 
Bonds,  Judgment 
and  Old  Claim 
Levies,  Sinking 
andBuildingFunds 

Township  and 
Special  Road  and 
Bridge  District 
Levies  notUnif  orm 
Over  the  County 
But  Reduced  to 
an  Average  Rate 

Total 

Rate  per 
$1000 

Tax  pei 
Capita 
1910 
Census 

Rate  per 
$1000 

Amount 
Charged 

Rate  per 
$1000 

Amount 
Charged 

Kearney  S 
Keith 

.55 
1.50 
2.20 

2,363 
3,250 
2,214 

3.67 

15,762 

50,998 
34,664 
17,311 
15,909 
109,120 
250,577 
76,884 
7,987 
6,299 
101,521 
7,908 
78,871 
23,575 
88,237 
76,485 
63,980 
149,291 
93,296 
10,961 
47,092 
62,980 
108,163 
63,436 
44,802 
86,510 
17,887 
83,549 
63,820 
128,027 
44,102 
101,000 
42,906 
71,478 
20,963 
67,127 
77,161 
7,456 
51,392 
52,270 
83,253 
64,055 
80,827 
10,454 
87,958 

11.87 
16.00 
17.20 
10.50 
18.68 
10.45 
14.41 
15.00 
15.00 
14.70 
14.50 
14.94 
15.00 
21.15 
13.25 
10.50 
17.11 
17.15 
8.00 
10.70 
13.51 
11.96 
11.20 
14.50 
11.41 
15.00 
10.15 
15.00 
12.20 
15.81 
11.88 
15.00 
22.30 
15.00 
15.20 
12.56 
14.00 
15.00 
14.36 
14.20 
11.23 
15.00 
15.00 
9.69 

5.6( 
9.01 

5.0: 

8.11 
'5.9' 
3.4( 
4.9( 
5.21 
2.« 

5.3: 

3.2( 
7.6( 
5.1' 
9.81 
5.8' 
4.9. 
7.7J 
8.81 
4.2( 

4.5: 

6.25 
5.61 
6.0; 
4.0{ 
4.9( 
4.9; 
4.6* 
6.8* 
6.0* 
5.2* 
6.3£ 
5.8* 
8.6c 
3.74 
8.9C 
5.22 
6.26 
5.9C 
5.51 
6.54 
6.16 
6.73 
4.56 
4.69 

Keya  Paha  .... 
Kimball 

Knox                S 

7.48 
.75 
.31 

43,691 
17,970 
1,669 

Lancaster 

1.70 

40,766 

Lincoln   .      ... 

Logan 

Loup 

Madison 

McPherson   .  .  . 

Merrick  S 

1.70 
.50 

8,975 
786 

5.74 

30,301 

Morrill 

Nance              S 

6.95 
1.05 
.50 
3.91 
.45 

29,000 
6,044 
3,027 
34,101 
2,470 

Nemaha  

Nuckolls  
Otoe 

3.20 
4.00 
.40 
2.00 

27,925 
21,755 

548 
8,802 

Pawnee  
Perkins  
Phelps  S 
Pierce  

4.50 
.31 
4.16 

19,806 
1,423 
37,626 

Platte  .  .         .  .  S 

Polk 

Red  Willow 

Richardson.  .   S 

2.21 

16,753 

Rock  

Saline  .  . 

.95 

7,843 

Sarpy  

Saunders   .... 

.50 
'  '  i.20  ' 

5,247 

'  '  1.81  ' 

4.18 

'  5,06  i 
35,556 

Scott's  Bluff  .  .  . 
Seward  S 
Sheridan  

10,199 

Sherman  S 
Sioux  

3.50 

11,216 

10.30 

33,022 

Stanton  .... 

Thayer  

2.36 

14,512 

Thomas  

Thurston  .  .  . 
Valley  S 
Washington  
Wayne. 

1.00 
1.00 
2.90 
.25 
4.00 
1.00 

3,426 
3,641 
17,003 
1,426 
21,554 
697 

7.16 

26,055 

.03 
3.99 

191 

Webster  .  . 
Wheeler.. 
York  S 

36,217 

Totals  . 

.  .     $472,955  .  . 

$964,449 

$6,635,261 

$14.10 

*S  —  Supervisor  or  township  organization 

35629 


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